WORK-LIFE BALANCE
Dear Boss: Your Team Wants You
to Go on Vacation
by Ron Friedman
JUNE 18, 2015
Over the past decade, a staggering number of studies have demonstrated that our work performance
plummets when we work prolonged periods without a break. We know that overworked employees
are prone to mood swings, impulsive decision-making, and poor concentration. They’re more likely
to lash out at perceived slights and struggle to empathize with colleagues. Worse still, they are
prone to negativity — and that negativity is contagious.
FURTHER READING
Yet at the average American company, 4 out of 10 employees (including those in management roles)
will forfeit vacation time this year.
There is every reason to believe that the cost of the mental and physical depletion that invariably
results is exponential when its victim is a manager. Not just because a supervisor’s mood and
decision-making affects more people, but because when a manager chooses to forgo time off, it
starts a domino effect that shapes cultural norms.
As I describe in a new book on the science of building a great workplace, organizational culture has
little to do with a company’s mission or vision statement. It is determined by the behaviors of those
at the top. As humans, we’ve evolved to mimic those around us, especially those in higher status
roles. Lower-status group members often copy the behaviors of those in leadership positions
because it helps align them with individuals who hold more influence in the group. The best
managers know that as leaders, their actions influence the behaviors of everyone around them.
When managers forgo vacation time, it not only
places them squarely on the road to burnout, it
also generates unspoken pressures for everyone
on their team to do the same. And ignoring the
body’s need for rest is not just a poor long-term
strategy. It also comes with considerable
opportunity cost.
We now have compelling evidence that the
restorative experiences we have on vacations bring us a sharpened attention, mental clarity, and
inspired insights. Take reaction time – a simple measure that indicates how quickly we pick up on
new information. Research commissioned by NASA found that after just a few days of vacation,
people’s reaction time jumps by an astonishing 80%.
Studies on creativity have found that spending time outdoors and traveling to a foreign country —
two activities people commonly engage in when they go on vacation — are among the most effective
ways of finding fresh perspectives and creative solutions. Simply put, you’re far more likely to have
HBR’s 10 Must Reads on
Managing Yourself
MANAGING YOURSELF BOOK
$24.95 ADD TO CART
SAVE � SHARE
a breakthrough idea while lounging on a beach in St. Martin than you are while typing away in your
office cubicle.
Vacations are not only a boon to the way we think; they also foster greater life satisfaction. Just last
year, Gallup released an eye-opening study showi.
WORK-LIFE BALANCEDear Boss Your Team Wants Youto Go o.docxwashingtonrosy
WORK-LIFE BALANCE
Dear Boss: Your Team Wants You
to Go on Vacation
by Ron Friedman
JUNE 18, 2015
Over the past decade, a staggering number of studies have demonstrated that our work performance
plummets when we work prolonged periods without a break. We know that overworked employees
are prone to mood swings, impulsive decision-making, and poor concentration. They’re more likely
to lash out at perceived slights and struggle to empathize with colleagues. Worse still, they are
prone to negativity — and that negativity is contagious.
FURTHER READING
Yet at the average American company, 4 out of 10 employees (including those in management roles)
will forfeit vacation time this year.
There is every reason to believe that the cost of the mental and physical depletion that invariably
results is exponential when its victim is a manager. Not just because a supervisor’s mood and
decision-making affects more people, but because when a manager chooses to forgo time off, it
starts a domino effect that shapes cultural norms.
As I describe in a new book on the science of building a great workplace, organizational culture has
little to do with a company’s mission or vision statement. It is determined by the behaviors of those
at the top. As humans, we’ve evolved to mimic those around us, especially those in higher status
roles. Lower-status group members often copy the behaviors of those in leadership positions
because it helps align them with individuals who hold more influence in the group. The best
managers know that as leaders, their actions influence the behaviors of everyone around them.
When managers forgo vacation time, it not only
places them squarely on the road to burnout, it
also generates unspoken pressures for everyone
on their team to do the same. And ignoring the
body’s need for rest is not just a poor long-term
strategy. It also comes with considerable
opportunity cost.
We now have compelling evidence that the
restorative experiences we have on vacations bring us a sharpened attention, mental clarity, and
inspired insights. Take reaction time – a simple measure that indicates how quickly we pick up on
new information. Research commissioned by NASA found that after just a few days of vacation,
people’s reaction time jumps by an astonishing 80%.
Studies on creativity have found that spending time outdoors and traveling to a foreign country —
two activities people commonly engage in when they go on vacation — are among the most effective
ways of finding fresh perspectives and creative solutions. Simply put, you’re far more likely to have
HBR’s 10 Must Reads on
Managing Yourself
MANAGING YOURSELF BOOK
$24.95 ADD TO CART
SAVE � SHARE
a breakthrough idea while lounging on a beach in St. Martin than you are while typing away in your
office cubicle.
Vacations are not only a boon to the way we think; they also foster greater life satisfaction. Just last
year, Gallup released an eye-opening study showi ...
WORK-LIFE BALANCEDear Boss Your Team Wants Youto Go orosacrosdale
WORK-LIFE BALANCE
Dear Boss: Your Team Wants You
to Go on Vacation
by Ron Friedman
JUNE 18, 2015
Over the past decade, a staggering number of studies have demonstrated that our work performance
plummets when we work prolonged periods without a break. We know that overworked employees
are prone to mood swings, impulsive decision-making, and poor concentration. They’re more likely
to lash out at perceived slights and struggle to empathize with colleagues. Worse still, they are
prone to negativity — and that negativity is contagious.
FURTHER READING
Yet at the average American company, 4 out of 10 employees (including those in management roles)
will forfeit vacation time this year.
There is every reason to believe that the cost of the mental and physical depletion that invariably
results is exponential when its victim is a manager. Not just because a supervisor’s mood and
decision-making affects more people, but because when a manager chooses to forgo time off, it
starts a domino effect that shapes cultural norms.
As I describe in a new book on the science of building a great workplace, organizational culture has
little to do with a company’s mission or vision statement. It is determined by the behaviors of those
at the top. As humans, we’ve evolved to mimic those around us, especially those in higher status
roles. Lower-status group members often copy the behaviors of those in leadership positions
because it helps align them with individuals who hold more influence in the group. The best
managers know that as leaders, their actions influence the behaviors of everyone around them.
When managers forgo vacation time, it not only
places them squarely on the road to burnout, it
also generates unspoken pressures for everyone
on their team to do the same. And ignoring the
body’s need for rest is not just a poor long-term
strategy. It also comes with considerable
opportunity cost.
We now have compelling evidence that the
restorative experiences we have on vacations bring us a sharpened attention, mental clarity, and
inspired insights. Take reaction time – a simple measure that indicates how quickly we pick up on
new information. Research commissioned by NASA found that after just a few days of vacation,
people’s reaction time jumps by an astonishing 80%.
Studies on creativity have found that spending time outdoors and traveling to a foreign country —
two activities people commonly engage in when they go on vacation — are among the most effective
ways of finding fresh perspectives and creative solutions. Simply put, you’re far more likely to have
HBR’s 10 Must Reads on
Managing Yourself
MANAGING YOURSELF BOOK
$24.95 ADD TO CART
SAVE � SHARE
a breakthrough idea while lounging on a beach in St. Martin than you are while typing away in your
office cubicle.
Vacations are not only a boon to the way we think; they also foster greater life satisfaction. Just last
year, Gallup released an eye-opening study showi ...
Employe Engagement Research Update by BlessingWhiteElizabeth Lupfer
This document provides a summary of research on employee engagement conducted in 2012. Some key findings include:
1) Engagement levels were stable or rising in most regions of the world compared to 2011 data.
2) "Intent to stay," an important predictor of turnover, remained stable globally. However, the specific dynamics of retention varied significantly between regions.
3) As in previous research, factors like tenure, level in the organization, and age were still correlated with higher engagement as people grew more experienced and senior.
4) Gender gaps in engagement emerged in some regions like India, the Middle East, and South America, where women reported lower engagement than men.
5) The top drivers of engagement
For all organizations, in all industries, and of all sizes, growth is a function of the intersections of the relationships of people from the CEO to the client. The dynamic between the CEO and the management team influences the frontline staff, which ultimately impacts the client. Depending upon the quality of these relationships, this impact can be positive or negative, resulting in growth or downsizing. Joe offers proven methods to help any organization become a stronger, more cohesive team, deliver remarkable employee and client experiences, reset and recharge, and grow regardless.
The document is the July 2021 edition of the monthly newsletter "Great Workplaces" published by Great Place to Work. It discusses the history and mission of Great Place to Work in identifying and helping organizations build high-trust workplace cultures. It was founded in 1981 based on research finding that strong employee relationships characterized by trust, pride and camaraderie are key drivers of business performance. The newsletter provides tips on relieving employee stress, taking stock of organizational goals and assessing workplace culture. It also introduces Great Place to Work's employee survey tool to help companies evaluate their workplace culture and identify areas for improvement.
Proko's Guide to Positivity and Effective Employee EngagementLeeWills3
Proko allows your employees to easily share good things about your culture and career opportunities, or simply acknowledge the people that are making work great.
Create e-cards and other sharable assets that employees can select, personalize, and share.
Import content to an easy-to-use, customizable microsite.
Track sharing activity and leverage those insights for future employer branding and employee advocacy activities.
Website: https://www.proko.co/product
This document provides guidance on creating a positive employee experience. It discusses how the modern workforce wants to learn new skills and find purpose in their work rather than just work to live. Companies need to focus on providing an excellent holistic employee experience to attract and retain top talent. The guide outlines strategies for developing extraordinary employee experiences, including empowering work-life synergy, frequent manager check-ins, opportunities for professional development, and fostering a culture where employees can bring their whole selves to work. It also discusses generational differences and the importance of understanding each employee's unique needs to boost engagement.
This document discusses the need for organizations to create a culture that supports employee well-being in order to retain top talent. It notes that high performers often give their all without balance, risking burnout. The challenges for HR are balancing output with wellness. Employers that prioritize talent needs are most successful. However, identifying overworked employees and selling wellness initiatives can be difficult. External coaching is suggested to boost careers and well-being privately. Creating a culture where people feel in control of work and life enhances positivity and productivity. Aligning individual and organizational interests through flexibility and development ensures staff thrive rather than just survive.
WORK-LIFE BALANCEDear Boss Your Team Wants Youto Go o.docxwashingtonrosy
WORK-LIFE BALANCE
Dear Boss: Your Team Wants You
to Go on Vacation
by Ron Friedman
JUNE 18, 2015
Over the past decade, a staggering number of studies have demonstrated that our work performance
plummets when we work prolonged periods without a break. We know that overworked employees
are prone to mood swings, impulsive decision-making, and poor concentration. They’re more likely
to lash out at perceived slights and struggle to empathize with colleagues. Worse still, they are
prone to negativity — and that negativity is contagious.
FURTHER READING
Yet at the average American company, 4 out of 10 employees (including those in management roles)
will forfeit vacation time this year.
There is every reason to believe that the cost of the mental and physical depletion that invariably
results is exponential when its victim is a manager. Not just because a supervisor’s mood and
decision-making affects more people, but because when a manager chooses to forgo time off, it
starts a domino effect that shapes cultural norms.
As I describe in a new book on the science of building a great workplace, organizational culture has
little to do with a company’s mission or vision statement. It is determined by the behaviors of those
at the top. As humans, we’ve evolved to mimic those around us, especially those in higher status
roles. Lower-status group members often copy the behaviors of those in leadership positions
because it helps align them with individuals who hold more influence in the group. The best
managers know that as leaders, their actions influence the behaviors of everyone around them.
When managers forgo vacation time, it not only
places them squarely on the road to burnout, it
also generates unspoken pressures for everyone
on their team to do the same. And ignoring the
body’s need for rest is not just a poor long-term
strategy. It also comes with considerable
opportunity cost.
We now have compelling evidence that the
restorative experiences we have on vacations bring us a sharpened attention, mental clarity, and
inspired insights. Take reaction time – a simple measure that indicates how quickly we pick up on
new information. Research commissioned by NASA found that after just a few days of vacation,
people’s reaction time jumps by an astonishing 80%.
Studies on creativity have found that spending time outdoors and traveling to a foreign country —
two activities people commonly engage in when they go on vacation — are among the most effective
ways of finding fresh perspectives and creative solutions. Simply put, you’re far more likely to have
HBR’s 10 Must Reads on
Managing Yourself
MANAGING YOURSELF BOOK
$24.95 ADD TO CART
SAVE � SHARE
a breakthrough idea while lounging on a beach in St. Martin than you are while typing away in your
office cubicle.
Vacations are not only a boon to the way we think; they also foster greater life satisfaction. Just last
year, Gallup released an eye-opening study showi ...
WORK-LIFE BALANCEDear Boss Your Team Wants Youto Go orosacrosdale
WORK-LIFE BALANCE
Dear Boss: Your Team Wants You
to Go on Vacation
by Ron Friedman
JUNE 18, 2015
Over the past decade, a staggering number of studies have demonstrated that our work performance
plummets when we work prolonged periods without a break. We know that overworked employees
are prone to mood swings, impulsive decision-making, and poor concentration. They’re more likely
to lash out at perceived slights and struggle to empathize with colleagues. Worse still, they are
prone to negativity — and that negativity is contagious.
FURTHER READING
Yet at the average American company, 4 out of 10 employees (including those in management roles)
will forfeit vacation time this year.
There is every reason to believe that the cost of the mental and physical depletion that invariably
results is exponential when its victim is a manager. Not just because a supervisor’s mood and
decision-making affects more people, but because when a manager chooses to forgo time off, it
starts a domino effect that shapes cultural norms.
As I describe in a new book on the science of building a great workplace, organizational culture has
little to do with a company’s mission or vision statement. It is determined by the behaviors of those
at the top. As humans, we’ve evolved to mimic those around us, especially those in higher status
roles. Lower-status group members often copy the behaviors of those in leadership positions
because it helps align them with individuals who hold more influence in the group. The best
managers know that as leaders, their actions influence the behaviors of everyone around them.
When managers forgo vacation time, it not only
places them squarely on the road to burnout, it
also generates unspoken pressures for everyone
on their team to do the same. And ignoring the
body’s need for rest is not just a poor long-term
strategy. It also comes with considerable
opportunity cost.
We now have compelling evidence that the
restorative experiences we have on vacations bring us a sharpened attention, mental clarity, and
inspired insights. Take reaction time – a simple measure that indicates how quickly we pick up on
new information. Research commissioned by NASA found that after just a few days of vacation,
people’s reaction time jumps by an astonishing 80%.
Studies on creativity have found that spending time outdoors and traveling to a foreign country —
two activities people commonly engage in when they go on vacation — are among the most effective
ways of finding fresh perspectives and creative solutions. Simply put, you’re far more likely to have
HBR’s 10 Must Reads on
Managing Yourself
MANAGING YOURSELF BOOK
$24.95 ADD TO CART
SAVE � SHARE
a breakthrough idea while lounging on a beach in St. Martin than you are while typing away in your
office cubicle.
Vacations are not only a boon to the way we think; they also foster greater life satisfaction. Just last
year, Gallup released an eye-opening study showi ...
Employe Engagement Research Update by BlessingWhiteElizabeth Lupfer
This document provides a summary of research on employee engagement conducted in 2012. Some key findings include:
1) Engagement levels were stable or rising in most regions of the world compared to 2011 data.
2) "Intent to stay," an important predictor of turnover, remained stable globally. However, the specific dynamics of retention varied significantly between regions.
3) As in previous research, factors like tenure, level in the organization, and age were still correlated with higher engagement as people grew more experienced and senior.
4) Gender gaps in engagement emerged in some regions like India, the Middle East, and South America, where women reported lower engagement than men.
5) The top drivers of engagement
For all organizations, in all industries, and of all sizes, growth is a function of the intersections of the relationships of people from the CEO to the client. The dynamic between the CEO and the management team influences the frontline staff, which ultimately impacts the client. Depending upon the quality of these relationships, this impact can be positive or negative, resulting in growth or downsizing. Joe offers proven methods to help any organization become a stronger, more cohesive team, deliver remarkable employee and client experiences, reset and recharge, and grow regardless.
The document is the July 2021 edition of the monthly newsletter "Great Workplaces" published by Great Place to Work. It discusses the history and mission of Great Place to Work in identifying and helping organizations build high-trust workplace cultures. It was founded in 1981 based on research finding that strong employee relationships characterized by trust, pride and camaraderie are key drivers of business performance. The newsletter provides tips on relieving employee stress, taking stock of organizational goals and assessing workplace culture. It also introduces Great Place to Work's employee survey tool to help companies evaluate their workplace culture and identify areas for improvement.
Proko's Guide to Positivity and Effective Employee EngagementLeeWills3
Proko allows your employees to easily share good things about your culture and career opportunities, or simply acknowledge the people that are making work great.
Create e-cards and other sharable assets that employees can select, personalize, and share.
Import content to an easy-to-use, customizable microsite.
Track sharing activity and leverage those insights for future employer branding and employee advocacy activities.
Website: https://www.proko.co/product
This document provides guidance on creating a positive employee experience. It discusses how the modern workforce wants to learn new skills and find purpose in their work rather than just work to live. Companies need to focus on providing an excellent holistic employee experience to attract and retain top talent. The guide outlines strategies for developing extraordinary employee experiences, including empowering work-life synergy, frequent manager check-ins, opportunities for professional development, and fostering a culture where employees can bring their whole selves to work. It also discusses generational differences and the importance of understanding each employee's unique needs to boost engagement.
This document discusses the need for organizations to create a culture that supports employee well-being in order to retain top talent. It notes that high performers often give their all without balance, risking burnout. The challenges for HR are balancing output with wellness. Employers that prioritize talent needs are most successful. However, identifying overworked employees and selling wellness initiatives can be difficult. External coaching is suggested to boost careers and well-being privately. Creating a culture where people feel in control of work and life enhances positivity and productivity. Aligning individual and organizational interests through flexibility and development ensures staff thrive rather than just survive.
This document discusses employee engagement for non-profit organizations. It begins with an agenda that covers what employee engagement is, ways to enhance engagement, and how to measure it. It then delves into each topic in detail, providing definitions of engaged, disengaged, and actively disengaged employees. It discusses factors that can enhance engagement, such as communication, development opportunities, recognition, trust in management, and team cohesion. Finally, it discusses methods for measuring engagement through surveys and sharing and acting on the results. The overall message is that engaged employees are more productive and committed to their work, so non-profits should focus on understanding and improving engagement.
Original article from the Flevy business blog can be found here:
http://flevy.com/blog/help-them-help-you-good-managers-inspire-good-employee-performance/
Gallup released its “State of the American Workplace” report, a comprehensive look at employee engagement and performance in the U.S. The study found that 30 percent of employees are engaged and inspired by their work, and at the other end, 20 percent are actively disengaged and uninspired. In the middle is the remainder: 50 million (50 percent) Americans who are not engaged by their work or their managers. They’re just kind of there.
Gallup holds managers entirely responsible for an employee’s level of engagement. The top 25 percent of teams (the best managed) have 50 percent fewer accidents and 41 percent fewer quality defects than the bottom 25 percent (the worst managed), and they incur far less in health care costs. With this in mind, we think that one of the most important decisions you can make in business is who you name manager. Good managers embolden your employees; bad managers hurt your bottom line. The good news? These four performance solutions can help at every level.
Health Care
Health care plays a vital role in a motivating a workforce. Research from Cornell University shows medical insurance has a great influence on an individual’s task performance, which affects workplace safety and performance. Cover your staff—it indicates you care about their well-being and inspires them to be safer and perform better.
Company Culture
Companies tend to this issue the least, because it doesn’t yield tangible results, but company culture is often the first link in a chain of subsequent performance defects. There isn’t a single formula to tightening the family ties of your organization, and it’s a big job—but you should be doing it, as it pays big dividends. Two examples to get you started:
The document provides an 8-point guide for HR directors to improve staff stress, anxiety, mental health, resilience and wellbeing. The most important step is to make the workplace an inherently healthy organization by understanding employees' needs, measuring where those needs are and aren't being met, and intervening to improve problem areas. An online tool called WeThrive can help organizations assess employee wellbeing across different areas and identify issues causing stress in order to take corrective actions. The guide stresses the importance of creating a work environment where employees feel their social, cognitive and emotional needs are met in order to maximize performance and job satisfaction.
The document discusses achieving work-life balance for teams. It notes that advances in technology have eliminated many jobs but increased workloads for managers. A survey found nearly half of companies report employee burnout accounts for 20-50% of annual employee turnover. The document provides tips for managers to address burnout such as communicating the importance of breaks, hiring sufficient staffing, redistributing work evenly, setting boundaries, and leading by example in taking time off.
Work Life Integration - Human Capital Insights - Vol. 6ADP, LLC
In this Issue of Human Capital Management Vol. 6:
Vacation Policies Around the World: How Adaptable Is Your Organization?
Predictive Analytics: Reaping Rewards While Avoiding Risk
What Small and Large Organizations Alike Can Learn From the First Year of Annual ACA
Based on our findings, in this year’s report you’ll find a diverse array of workplace and employee quality of life factors represented; these include trends related to the built environment, technological advances and the workforce. Each of the trends, by definition, has the ability to improve the quality of life of people and their communities. As one would expect, however, organizational commitment
to its people — both on a professional and personal level — remains a central theme among all of our trends. With more employees viewing their work and life as one, it can only benefit an organization
to become acquainted with the workplace trends that will engage and retain the workforce of 2014.
French law mandates at least five weeks of vacation. Australia provides both paid maternal and paternal leave. Denmark breeds work-life balance into their culture.
So why is American so out of touch? In stark contrast to these balanced regimes, Americans continue to pander through the workday. We extend our hours, snack on sad desk lunches, and forgo vacation to get ahead. But science says there’s a fatal flaw in our system…
Today, 70 percent of the American workforce is disengaged. The rat race mentality has left us sleepwalking through life — and it’s time to wake up. Join Joe Mechlinski, New York Times Bestselling author and speaker, as he introduces science into the great work debate. Joe will show you how to become better in tune with your three brains (head, heart, and gut) to help reshape your thinking, motivation, and behaviors to find greater fulfillment at work.
15Five's Guide To Creating High Performing TeamsDavid Hassell
Managing a team has never been more complex. Knowledge-based workers are challenging status-quo leadership at every turn. How will you keep your A-players, ensure their happiness and call forth their best week after week?
15Five's Guide To Creating High Performing Teams contains helpful management tips on everything from building better relationships with employees to supercharging meetings and performance reviews.
This document discusses how to boost employee morale during tough economic times. It notes that employee morale is low due to job insecurity and lack of raises and promotions. As a result, 70% of US employees report feeling disengaged from their work. The document then provides three suggestions for improving employee morale: 1) recognize employees' contributions, 2) provide training opportunities for skill development, and 3) foster communication and a sense of being part of a team. It stresses that gaining employee feedback through an anonymous survey is important for understanding engagement issues.
Engagement and Retention Guide packed with quick tips, article links, and how to drive engagement and retention today. Leaders' and Managers' how to guide for every day use.
Special report finding budget for your leadership training - your questions a...Tom Cooper, PMP
This report covers the benefits of a leadership training program and provides you with the essential questions that your boss will ask about training - ROI, costs, and how to find the right provider for your leadership development training program.
The Engagement Gap: How executives and employees think differently about empl...Brian Solis
New survey data shows that employees and executives have different views about employee engagement and the things organizations do to improve it. This is the result of the Engagement Gap. Employee engagement programs, while well intentioned, often miss the mark. This white paper describes the Engagement Gap, and shares survey results captured by Jostle Corporation in partnership with Brian Solis. The data suggests that effective employee engagement programs focus on turning organizations into more meaningful, congenial, and transparent communities.
This white paper discusses the importance of employee engagement for business success. It summarizes research showing that only 30% of American workers are engaged, while 52% are not engaged and 18% are actively disengaged. This high level of disengagement costs American businesses an estimated $450 billion to $550 billion annually in lost productivity. The paper advocates for adopting a "People First" approach to create a highly engaged workforce, where employees are passionately committed to the organization's mission and values. It promotes specific strategies like defining what engagement means, establishing engagement metrics, and implementing the "10 Rules for Creating Outrageous Engagement" to close the engagement gap in organizations.
Much progress has been made in the area of mental health in the last several years; talking about it openly and honestly has become more commonplace, and governments and businesses have recognised that they have a major role to play in helping people look after their mental wellbeing.
The Workplace Mental Wellbeing Audit helps businesses and other organisations understand the mental health of their employees and in turn take steps to help them. This report from the CIPR, PRCA and ICCO surveys 559 PR professionals through their networks, with the aim to understand
specifically the mental wellbeing of those working in the PR and Communications industry, the impact of coronavirus has had and changes over time.
Beating The Bear Market With Engaged EmployeesMark Hirschfeld
1. The document discusses how maintaining employee engagement can help companies beat a bear market. It provides strategies for keeping employees motivated and productive during an economic downturn.
2. Five key differentiators are identified that successful companies focus on: setting a clear direction, open communication, career development, recognition, and well-being.
3. Engaged employees are linked to better business outcomes like customer loyalty and retention, lower turnover, and higher productivity. Maintaining engagement can improve a company's bottom line during difficult economic times.
MORALE-MOTIVATION in PUBLIC RESOURCE MANAGEMENT.pptxtambalangelrose
The document discusses strategies for improving employee morale and motivation. It covers topics like the definition of morale and motivation, factors that influence job satisfaction and employee morale, the importance of performance-based rewards, and suggestions for motivating employees. Some key points include that leadership style, the reward system, organizational climate and work structure are important factors for motivation. It also discusses the differences between intrinsic and extrinsic motivation and providing rewards at the group level to improve performance.
This document discusses job satisfaction and ways to improve it. It reports that only 30% of US workers are engaged in their jobs according to a 2013 Gallup poll. Both employees and employers can take actions to increase satisfaction. For employees, this includes knowing their values, considering what they receive from their job, being realistic, avoiding lingering dissatisfaction, and considering career advancement. For employers, actions include creating a higher calling in jobs, setting development plans, being clear on expectations, increasing communication, and appreciating efforts. Recognition from employers is important for engagement and commitment.
In this report, we look at five key changes that have already begun to occur in the workforce landscape, and provide strategic actions to aid the process of organizational transition to adapt to them.
It is time to conduct a “reset” exercise and put employee
engagement back in its proper place and perspective. This paper
identifies five areas that our research has shown to be
potentially troublesome for companies - especially in terms of
helping them frame their expectations in the most reasonable,
realistic and productive ways. We have discussed them here to
help you understand the true power of aligning employee drives
and needs with those of your company
Write 250 to 300 words in which you describe a press release address.docxdunnramage
Write 250 to 300 words in which you describe a press release addressing a scandal or setback related to your chosen topic.
•Topic: the feminist movement
•Locate a press release addressing a scandal or other setback related to your chosen topic. This press release may address individuals involved in the field or movement or an issue which affects the field or movement itself.
•First, explain the nature of the scandal or setback, how this scandal affected an individual’s career or the field or movement as a whole, and what details of the scandal that the press release addressed or ignored.
•Next, discuss the role of the mass media in reporting this scandal and why it was newsworthy. Discuss the journalistic, political, and societal purpose of reporting it, and how the press release was written to mitigate the public response to the scandal. Also, discuss why a press release was preferable – for the client or the public – to the alternatives, such as tabloids, blogs, and rumors.
•Format your response consistent with APA guidelines.
.
Write 200 word response to each question1. During his campaign .docxdunnramage
Write 200 word response to each question:
1. During his campaign for president, Barack Obama used the phrase “post-racial America,” which was understood to mean that race and other identity groups would cease to be targets of prejudice. Although such tolerance has come a long way since the 1950's, what more could be done to bring us to a completely “post-racial” society?
2. Think of a situation where you worked successfully with people from identity groups other than your own. What allowed you to work successfully with them?
.
More Related Content
Similar to WORK-LIFE BALANCEDear Boss Your Team Wants Youto Go o.docx
This document discusses employee engagement for non-profit organizations. It begins with an agenda that covers what employee engagement is, ways to enhance engagement, and how to measure it. It then delves into each topic in detail, providing definitions of engaged, disengaged, and actively disengaged employees. It discusses factors that can enhance engagement, such as communication, development opportunities, recognition, trust in management, and team cohesion. Finally, it discusses methods for measuring engagement through surveys and sharing and acting on the results. The overall message is that engaged employees are more productive and committed to their work, so non-profits should focus on understanding and improving engagement.
Original article from the Flevy business blog can be found here:
http://flevy.com/blog/help-them-help-you-good-managers-inspire-good-employee-performance/
Gallup released its “State of the American Workplace” report, a comprehensive look at employee engagement and performance in the U.S. The study found that 30 percent of employees are engaged and inspired by their work, and at the other end, 20 percent are actively disengaged and uninspired. In the middle is the remainder: 50 million (50 percent) Americans who are not engaged by their work or their managers. They’re just kind of there.
Gallup holds managers entirely responsible for an employee’s level of engagement. The top 25 percent of teams (the best managed) have 50 percent fewer accidents and 41 percent fewer quality defects than the bottom 25 percent (the worst managed), and they incur far less in health care costs. With this in mind, we think that one of the most important decisions you can make in business is who you name manager. Good managers embolden your employees; bad managers hurt your bottom line. The good news? These four performance solutions can help at every level.
Health Care
Health care plays a vital role in a motivating a workforce. Research from Cornell University shows medical insurance has a great influence on an individual’s task performance, which affects workplace safety and performance. Cover your staff—it indicates you care about their well-being and inspires them to be safer and perform better.
Company Culture
Companies tend to this issue the least, because it doesn’t yield tangible results, but company culture is often the first link in a chain of subsequent performance defects. There isn’t a single formula to tightening the family ties of your organization, and it’s a big job—but you should be doing it, as it pays big dividends. Two examples to get you started:
The document provides an 8-point guide for HR directors to improve staff stress, anxiety, mental health, resilience and wellbeing. The most important step is to make the workplace an inherently healthy organization by understanding employees' needs, measuring where those needs are and aren't being met, and intervening to improve problem areas. An online tool called WeThrive can help organizations assess employee wellbeing across different areas and identify issues causing stress in order to take corrective actions. The guide stresses the importance of creating a work environment where employees feel their social, cognitive and emotional needs are met in order to maximize performance and job satisfaction.
The document discusses achieving work-life balance for teams. It notes that advances in technology have eliminated many jobs but increased workloads for managers. A survey found nearly half of companies report employee burnout accounts for 20-50% of annual employee turnover. The document provides tips for managers to address burnout such as communicating the importance of breaks, hiring sufficient staffing, redistributing work evenly, setting boundaries, and leading by example in taking time off.
Work Life Integration - Human Capital Insights - Vol. 6ADP, LLC
In this Issue of Human Capital Management Vol. 6:
Vacation Policies Around the World: How Adaptable Is Your Organization?
Predictive Analytics: Reaping Rewards While Avoiding Risk
What Small and Large Organizations Alike Can Learn From the First Year of Annual ACA
Based on our findings, in this year’s report you’ll find a diverse array of workplace and employee quality of life factors represented; these include trends related to the built environment, technological advances and the workforce. Each of the trends, by definition, has the ability to improve the quality of life of people and their communities. As one would expect, however, organizational commitment
to its people — both on a professional and personal level — remains a central theme among all of our trends. With more employees viewing their work and life as one, it can only benefit an organization
to become acquainted with the workplace trends that will engage and retain the workforce of 2014.
French law mandates at least five weeks of vacation. Australia provides both paid maternal and paternal leave. Denmark breeds work-life balance into their culture.
So why is American so out of touch? In stark contrast to these balanced regimes, Americans continue to pander through the workday. We extend our hours, snack on sad desk lunches, and forgo vacation to get ahead. But science says there’s a fatal flaw in our system…
Today, 70 percent of the American workforce is disengaged. The rat race mentality has left us sleepwalking through life — and it’s time to wake up. Join Joe Mechlinski, New York Times Bestselling author and speaker, as he introduces science into the great work debate. Joe will show you how to become better in tune with your three brains (head, heart, and gut) to help reshape your thinking, motivation, and behaviors to find greater fulfillment at work.
15Five's Guide To Creating High Performing TeamsDavid Hassell
Managing a team has never been more complex. Knowledge-based workers are challenging status-quo leadership at every turn. How will you keep your A-players, ensure their happiness and call forth their best week after week?
15Five's Guide To Creating High Performing Teams contains helpful management tips on everything from building better relationships with employees to supercharging meetings and performance reviews.
This document discusses how to boost employee morale during tough economic times. It notes that employee morale is low due to job insecurity and lack of raises and promotions. As a result, 70% of US employees report feeling disengaged from their work. The document then provides three suggestions for improving employee morale: 1) recognize employees' contributions, 2) provide training opportunities for skill development, and 3) foster communication and a sense of being part of a team. It stresses that gaining employee feedback through an anonymous survey is important for understanding engagement issues.
Engagement and Retention Guide packed with quick tips, article links, and how to drive engagement and retention today. Leaders' and Managers' how to guide for every day use.
Special report finding budget for your leadership training - your questions a...Tom Cooper, PMP
This report covers the benefits of a leadership training program and provides you with the essential questions that your boss will ask about training - ROI, costs, and how to find the right provider for your leadership development training program.
The Engagement Gap: How executives and employees think differently about empl...Brian Solis
New survey data shows that employees and executives have different views about employee engagement and the things organizations do to improve it. This is the result of the Engagement Gap. Employee engagement programs, while well intentioned, often miss the mark. This white paper describes the Engagement Gap, and shares survey results captured by Jostle Corporation in partnership with Brian Solis. The data suggests that effective employee engagement programs focus on turning organizations into more meaningful, congenial, and transparent communities.
This white paper discusses the importance of employee engagement for business success. It summarizes research showing that only 30% of American workers are engaged, while 52% are not engaged and 18% are actively disengaged. This high level of disengagement costs American businesses an estimated $450 billion to $550 billion annually in lost productivity. The paper advocates for adopting a "People First" approach to create a highly engaged workforce, where employees are passionately committed to the organization's mission and values. It promotes specific strategies like defining what engagement means, establishing engagement metrics, and implementing the "10 Rules for Creating Outrageous Engagement" to close the engagement gap in organizations.
Much progress has been made in the area of mental health in the last several years; talking about it openly and honestly has become more commonplace, and governments and businesses have recognised that they have a major role to play in helping people look after their mental wellbeing.
The Workplace Mental Wellbeing Audit helps businesses and other organisations understand the mental health of their employees and in turn take steps to help them. This report from the CIPR, PRCA and ICCO surveys 559 PR professionals through their networks, with the aim to understand
specifically the mental wellbeing of those working in the PR and Communications industry, the impact of coronavirus has had and changes over time.
Beating The Bear Market With Engaged EmployeesMark Hirschfeld
1. The document discusses how maintaining employee engagement can help companies beat a bear market. It provides strategies for keeping employees motivated and productive during an economic downturn.
2. Five key differentiators are identified that successful companies focus on: setting a clear direction, open communication, career development, recognition, and well-being.
3. Engaged employees are linked to better business outcomes like customer loyalty and retention, lower turnover, and higher productivity. Maintaining engagement can improve a company's bottom line during difficult economic times.
MORALE-MOTIVATION in PUBLIC RESOURCE MANAGEMENT.pptxtambalangelrose
The document discusses strategies for improving employee morale and motivation. It covers topics like the definition of morale and motivation, factors that influence job satisfaction and employee morale, the importance of performance-based rewards, and suggestions for motivating employees. Some key points include that leadership style, the reward system, organizational climate and work structure are important factors for motivation. It also discusses the differences between intrinsic and extrinsic motivation and providing rewards at the group level to improve performance.
This document discusses job satisfaction and ways to improve it. It reports that only 30% of US workers are engaged in their jobs according to a 2013 Gallup poll. Both employees and employers can take actions to increase satisfaction. For employees, this includes knowing their values, considering what they receive from their job, being realistic, avoiding lingering dissatisfaction, and considering career advancement. For employers, actions include creating a higher calling in jobs, setting development plans, being clear on expectations, increasing communication, and appreciating efforts. Recognition from employers is important for engagement and commitment.
In this report, we look at five key changes that have already begun to occur in the workforce landscape, and provide strategic actions to aid the process of organizational transition to adapt to them.
It is time to conduct a “reset” exercise and put employee
engagement back in its proper place and perspective. This paper
identifies five areas that our research has shown to be
potentially troublesome for companies - especially in terms of
helping them frame their expectations in the most reasonable,
realistic and productive ways. We have discussed them here to
help you understand the true power of aligning employee drives
and needs with those of your company
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Denis is a dynamic and results-driven Chief Information Officer (CIO) with a distinguished career spanning information systems analysis and technical project management. With a proven track record of spearheading the design and delivery of cutting-edge Information Management solutions, he has consistently elevated business operations, streamlined reporting functions, and maximized process efficiency.
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Date: May 29, 2024
Tags: Information Security, ISO/IEC 27001, ISO/IEC 42001, Artificial Intelligence, GDPR
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WORK-LIFE BALANCEDear Boss Your Team Wants Youto Go o.docx
1. WORK-LIFE BALANCE
Dear Boss: Your Team Wants You
to Go on Vacation
by Ron Friedman
JUNE 18, 2015
Over the past decade, a staggering number of studies have
demonstrated that our work performance
plummets when we work prolonged periods without a break. We
know that overworked employees
are prone to mood swings, impulsive decision-making, and poor
concentration. They’re more likely
to lash out at perceived slights and struggle to empathize with
colleagues. Worse still, they are
prone to negativity — and that negativity is contagious.
FURTHER READING
Yet at the average American company, 4 out of 10 employees
(including those in management roles)
will forfeit vacation time this year.
2. There is every reason to believe that the cost of the mental and
physical depletion that invariably
results is exponential when its victim is a manager. Not just
because a supervisor’s mood and
decision-making affects more people, but because when a
manager chooses to forgo time off, it
starts a domino effect that shapes cultural norms.
As I describe in a new book on the science of building a great
workplace, organizational culture has
little to do with a company’s mission or vision statement. It is
determined by the behaviors of those
at the top. As humans, we’ve evolved to mimic those around us,
especially those in higher status
roles. Lower-status group members often copy the behaviors of
those in leadership positions
because it helps align them with individuals who hold more
influence in the group. The best
managers know that as leaders, their actions influence the
behaviors of everyone around them.
When managers forgo vacation time, it not only
places them squarely on the road to burnout, it
also generates unspoken pressures for everyone
on their team to do the same. And ignoring the
3. body’s need for rest is not just a poor long-term
strategy. It also comes with considerable
opportunity cost.
We now have compelling evidence that the
restorative experiences we have on vacations bring us a
sharpened attention, mental clarity, and
inspired insights. Take reaction time – a simple measure that
indicates how quickly we pick up on
new information. Research commissioned by NASA found that
after just a few days of vacation,
people’s reaction time jumps by an astonishing 80%.
Studies on creativity have found that spending time outdoors
and traveling to a foreign country —
two activities people commonly engage in when they go on
vacation — are among the most effective
ways of finding fresh perspectives and creative
solutions. Simply put, you’re far more likely to have
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4. a breakthrough idea while lounging on a beach in St. Martin
than you are while typing away in your
office cubicle.
Vacations are not only a boon to the way we think; they also
foster greater life satisfaction. Just last
year, Gallup released an eye-opening study showing that how
often you vacation is a better
predicator of your well-being than the amount of money you
earn. In fact, according to Gallup’s
data, a regular vacationer earning $24,000 a year is generally
happier than an infrequent vacationer
earning 5 times as much.
And that elevated well-being affects more than just people’s
moods. It also influences the way they
think about their jobs. According to a Nielsen poll, more than
70% of regular vacationers are
satisfied with their job. But those who don’t vacation? A measly
46% are satisfied.
Just why do vacations affect us so strongly? In part, it’s because
they allow us to disengage from the
stress of work and replenish our mental and physical energy.
But psychologists believe there’s more
5. to the story than just recovery. Vacations provide us with an
opportunity to engage in autonomous
experiences and allow us uninterrupted time with loved ones
and close friends. They also enable us
to build our competence in hobbies we cherish. In others words,
a good vacation grants us what we
desperately seek in our work — energizing experiences that
fulfill our basic, human psychological
needs.
Given all the benefits of vacations, perhaps it’s time we
considered treating unused vacation days as
a valuable metric — one that reflects the inverse of a healthy
workplace culture; an indication that a
company is suffering from energy mismanagement.
So how do we reverse the trend of unused vacation time? How
do we get more people feeling good
about taking vacations when clearly, their company benefits
from them taking a break? Encouraging
managers to model the right behaviors and educating employees
about the benefits of time off is a
good start, but it’s unlikely to be enough — not when recent
economic struggles have trained so
many workers to avoid appearing replaceable, even if it’s for
6. just a few days.
For those who are genuinely serious about getting employees to
vacation, a more promising
approach involves offering a monetary incentive that rewards
taking time off. It’s a tactic that’s
slowly gaining traction among a growing number of companies.
The RAND Corporation, for
example, no longer pays employees their regular salary while
they’re on vacation. Instead, they pay
time and a half. The US Travel Association has set up an
internal raffle worth $500. To be eligible,
employees have to do one thing: Use up all of the previous
year’s vacation days.
Then there’s the Rolls Royce of pro-vacation policies, furnished
by FullContact. The Denver
software company has implemented a program that actually pays
employees $7,500 to take their
family on vacation. The only stipulation is that they not do any
work during their time off. If you’re
on a FullContact-sponsored getaway and you’re caught opening
a single work email, you’re
obligated to return every penny. (As a result, job application
numbers at FullContact are up, and
7. turnover has dropped.)
What makes these policies notable is not their generosity. It’s
that they provide clear evidence that a
company is serious about encouraging employees to restock
their mental energy so that they can
continue to excel.
We live in an age when vacations and the restorative
experiences they provide are no longer a
luxury. They are essential to our engagement, performance, and
creativity.
Ron Friedman, Ph.D., is an award-
winning psychologist and the founder of ignite80, a company th
at teaches leaders
practical, evidence-
based strategies for working smarter and creating thriving organ
izations. He is the author of The
Best Place to Work: The Art and Science of Creating an Extraor
dinary Workplace, and frequently delivers keynotes
and workshops on the science of workplace excellence. To recei
ve an email when he posts a new article, click here.
This article is about WORK-LIFE BALANCE
�
8. Related Topics: STRESS | LEADING TEAMS
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Wayne Bergman 3 years ago
This is especially true to in privately held businesses.
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ECONOMY
Managing Demographic Risk
by Rainer Strack, Jens Baier, and Anders Fahlander
FROM THE FEBRUARY 2008 ISSUE
Most executives in developed nations are vaguely aware that a
major demographic shiftis about to transform their societies and
their companies—and assume there is littlethey can do about
such a monumental change. They’re right in the first instance,
wrong in the second.
The statistics are compelling. In most developed economies, the
workforce is steadily aging, a
reflection of declining birth rates and the graying of the baby
boom generation. The percentage of
the U.S. workforce between the ages of 55 and 64, for example,
is growing faster than any other age
group.
The situation is particularly acute in certain industries. In the
U.S. energy sector, more than a third
of the workforce already is over 50 years old, and that age
group is expected to grow by more than
10. 25% by 2020. The number of workers over the age of 50 in the
Japanese financial services sector is
projected to rise by 61% between now and then. Indeed, even in
an emerging economy like China’s,
the number of manufacturing workers aged 50 or older will
more than double in the next 15 years.
But national and even industry statistics like these serve mainly
to put managers on notice of a
general problem. The important issue is the demographic risk
your own firm faces. As employees
get older and retire, businesses can face significant losses of
critical knowledge and skills, as well as
decreased productivity. The demographic trend has been
exacerbated by the relentless focus on cost
reduction that’s become the business norm. In their zeal to
become lean, organizations continue to
have round after round of layoffs—without realizing that in just
a few years they may confront
severe labor shortages or, if they’ve shed mostly younger
workers, be left with a relatively old
workforce. In some cases, a company’s ability to conduct
business may even be hindered: When
people begin retiring in droves, there may be no one left who
11. knows how to operate crucial
equipment or manage important customer relationships.
We offer here a systematic approach to analyzing future
workforce supply and demand under
different growth scenarios and on a job-by-job basis. It enables
companies to determine how many
employees they are likely to need, which qualifications they
should have, and when they will need
them. With that information, they can set up a tailored
retention, recruitment, and talent
management strategy for the job functions at greatest risk of a
labor shortage. Such an initiative
must be launched long before things reach a crisis stage,
because the remedies may need years to
take effect. Companies that act early not only will minimize the
risk but also will gain an important
advantage over their rivals.
The Nature of the Risk
In coming years, corporations will face two categories of
demographic risk: risks having to do with
retiring employees and risks having to do with aging employees.
Both require creative forethought
and active management.
12. Retiring employees.
When a worker retires, you lose someone to do a job and the
accumulated knowledge and expertise
that this person takes out the door with him. If many people are
retiring and they’re difficult to
replace, your organization faces what we call capacity risk—a
potentially diminished ability to carry
out the company’s business of making a product or offering a
service.
Take RWE, Europe’s third-largest energy utility, a company
we’ve worked with on assessing and
managing demographic risk. The publicly traded German utility,
which in 2006 had annual sales of
€44 billion and more than 70,000 employees, restructured
several times over the past decade. The
power generation and mining division, RWE Power, for
example, basically cut its workforce in half
between 1992 and today. Until recently, the company was
encouraging older workers to leave under
large-scale early retirement schemes.
When the Problem Is Growth
As veterans of “talent wars” know, rapid
13. growth can create labor shortages. In
India, for example, where labor is thought
to be plentiful and the workforce is
relatively young, we’re already seeing
early signs of severe scarcities of workers
in certain specialized jobs. Our approach
to demographic risk—systematically
assessing and managing the risk by job
function—can also be used in industries
or countries where economic growth
threatens to outstrip growth in the
workforce.
Take the example of an Eastern European
bank that was losing workers not to
retirement but to attrition, as competitors
fought to attract talent in an industry that
was burgeoning while capitalism took hold
in the formerly Communist market. By
14. analyzing future workforce supply and
demand under different growth scenarios
and on a job-by-job basis, the bank
But an analysis of retirement trends and future labor demand at
the company—over time horizons of
five, 10, and 15 years—revealed that today’s workforce surplus
would in several years turn into a
shortfall in many parts of the business. And the loss of talent
due to retirement would occur just as
the recruitment of new employees for critical positions at the
company became more difficult.
In many developed economies, there already is a mismatch
between labor supply and demand.
Germany today faces an immediate shortage of qualified
engineering graduates. In 2006 the country
had a deficit of approximately 48,000 engineers, and that figure
is expected to grow significantly in
coming years. At the same time, the country has too many
unskilled workers: The unemployment
rate of unskilled labor is more than six times higher than that of
university graduates. Most
industrialized countries face similar situations. (Some
developing economies also face a skill
15. shortage, at least in certain industries, a problem discussed in
the sidebar “When the Problem Is
Growth.”)
Aging employees.
Even before older workers start retiring in large
numbers, they can pose distinct management
challenges. Of course, age brings experience and
wisdom that make employees extremely valuable
in all kinds of ways. However, in certain settings,
productivity may suffer. For example, older
workers may not have the robustness needed in
physically demanding manufacturing jobs. They
may lack up-to-date skills owing to technological
changes. In certain situations, they may become
less motivated because they see fewer career
opportunities ahead of them. They may also be
susceptible to health problems that increase
absenteeism or force them into reduced work
roles. Thus, although age and experience can
16. make workers more effective in many positions,
in certain jobs an aging workforce can create a
productivity risk.
determined how many employees it was
likely to need, what qualifications they
should have, and when it would need
them. With that information, the bank set
up a tailored retention, recruitment, and
talent management strategy for the job
functions at greatest risk of a labor
shortage.
A Looming Challenge
An aging workforce will have implications
for most developed economies, but
managers need to examine the particular
effect it will have on their own companies
by looking at the age distribution of their
employee base. When RWE Power, the
power generation and mining division of a
European utility, examined the
demographics of its workforce, it saw that
if current trends continued, in 10 years a
large percentage of its workers would be
at or near retirement.
The importance of effectively addressing demographic changes
can be seen at a business like RWE
Power. Today, some 20% of the division’s workforce is over the
age of 50. Projections indicate that
17. this age group will make up more than half the workforce by
2011—and close to 80% by 2018. (See
the exhibit “A Looming Challenge.”)
Some of the issues raised by an aging workforce
may not be immediately evident. For example,
several thousand employees work in a three-shift
environment at RWE Power, but many won’t have
the stamina—or their doctors’ permission—to
work in rotating shifts as they grow older. So RWE
Power will have to find not only new positions for
the three-shift workers who can’t function in
their jobs any longer but also replacements for
them. Although the problem of finding a new job
for an employee no longer able to work in a three-
shift environment is less likely to arise in the
United States, which lacks the job protection laws
common in Europe, political or other
considerations may create similar constraints.
18. When calculating both kinds of demographic risk
—capacity risk and productivity risk—it’s
important to use the right metrics. For example, a
Workers over age 50
will make up more
than half the
workforce of the
business by 2011—
and close to 80% by
2018.
relatively high average age among employees
doesn’t necessarily signify a serious risk of losing
crucial talent to retirement. The distribution of
ages—that is, whether a large percentage of your
employees are clustered within a relatively
narrow age band—is the real sign that you’ll
encounter this problem. If a skewed distribution
in the age structure does exist, however, the
average age of employees will let you know when
you’ll face it.
19. Assessing the Risk
Capacity risk and productivity risk are assessed
differently. In the case of capacity risk, you
determine the gap between your organization’s
future demand for workers and anticipated
workforce levels, and then figure out how difficult
it will be to close that gap by hiring from outside
the company. In the case of productivity risk, you
determine how many workers will fall into older
age cohorts in coming years and what
implications that will have.
Calculating the risks at a companywide level doesn’t provide an
accurate picture of the problem.
Drilling down to the level of individual locations or business
units is more useful. But in the end you
need to figure out how age trends will affect three different
categories of jobs: relatively broad job
groups, narrower job families within each of those groups, and
more specific job functions within
each of the families.
20. Bringing the analysis down to these levels will almost certainly
reveal an anticipated surplus of
people in certain job groups, families, and functions and a
shortfall in others. Managing the risk will
require addressing the problem at these levels as well. Indeed,
using uniform remedies across an
entire company would be ineffective and probably
counterproductive, especially for productivity
risk, which varies significantly by job category.
Let’s look at what’s involved in this progressively granular
analysis, focusing in detail on the
problem of retiring workers and capacity risk.
Run a quick check to identify where potential challenges lie.
The first step is to do a relatively simple analysis of your
company’s situation, one that draws on
easily available company data. The aim is to determine, by
location and business unit, future
workforce levels and age distribution, based on anticipated
retirement and attrition rates. Much of
the information—for example, the number of employees and
their respective ages—can be pulled
from existing HR data systems and fed into a simple simulation
tool that forecasts what will happen
21. under a number of scenarios over the next five to 15 years.
Historical data on such things as attrition
and recruiting can be used to generate projections, but these
need to be enriched with management
discussions of future trends. RWE Power’s historic annual
attrition rate of less than 1%, for instance,
could rise as demand for specialized workers grows in the labor
market.
This first analytical cut quickly provides a good idea of which
locations and business units are likely
to have the steepest age distribution and most dramatic capacity
losses. In units or locations with
the highest problems, companies can then do a more detailed
analysis.
Create a job taxonomy to refine your assessment.
You’ll need to continue the analysis at the level of the three job
categories: groups, families, and
functions. Employees within each category share similar skills
and can transfer within them, but the
amount of time it takes to successfully transition to a new job
varies with each category.
Within a job function, employees can get up to speed in new
positions in less than three months,
with relatively little training. Within a job family, it takes
22. employees changing roles less than 18
months to acquire the necessary skills. Within a job group, a
transfer may require up to 36 months
and significant training.
Creating a Job Taxonomy for
Your Company
Companies can mitigate critical worker
shortages by transferring employees into
open jobs. So the first step in assessing
demographic risk is to evaluate how easily
you can shift employees among positions.
You can do this by categorizing jobs in the
company on three levels: functions,
families, and groups.
Job functions comprise jobs that are
essentially the same, but in different
locations, or similar enough to require the
same sets of skills. In the hypothetical
example below, all system controllers are
23. in the same job function because they all
have detailed knowledge about the
operation of power-plant control systems.
Workers transferring within a function can
get up to speed in less than three months,
with relatively little training.
Job functions that require closely related
but somewhat different knowledge and
skills belong to the same job family. Here,
system controllers and power electronics
electricians are in the same family
because both are skilled electricians who
have deep knowledge about operational
processes but who work on different
electronic systems. Employees can
successfully transition to new roles within
a family in less than 18 months, with the
right training.
Where Will You Face Talent
24. Gaps?
To identify where your greatest challenges
will lie as workers retire or leave, you need
to forecast what your workforce needs will
be in each job function—or, as a first cut,
in each job family—at different points in
the future. This forecast requires two
inputs: internal workforce supply (that is,
your company’s anticipated workforce
levels, given assumptions about
retirement age, early retirement
programs, and attrition rates) and
workforce demand (based on strategic
RWE Power held workshops at which operational managers
categorized jobs based on this notion of
exchangeability. Then the job function, family, and group that
each employee belonged to were
entered in the company’s employee data system. (The exhibit
“Creating a Job Taxonomy for Your
Company” shows how certain jobs might be classified.)
25. Categorizing employees based on their skills and
the exchangeability of those skills is crucial to the
systematic evaluation and management of
demographic risk. That’s because the more time it
takes to train someone to do another job, the
more it will cost to prevent a shortage of workers
as people retire.
Pinpoint potential capacity problems.
Having developed this taxonomy of job
categories, you can begin identifying what your
organization’s greatest capacity challenges will be
as workers retire. (The exhibit “Where Will You
Face Talent Gaps?” lays out a multistep approach
to assessing your capacity risk.)
Similar job families are part of the same
job group. This illustrative chart shows
that system controllers and electrical
planners belong to the electrician job
group. Shifting from system controller to
electrical planner, however, would require
an employee to learn new planning
26. processes, planning standards, and
planning software. Workers transferring to
new positions outside their job family but
within their job group require up to 36
months of training.
If you enter each employee’s job function,
family, and group in your employee
database, you can easily identify transfers
that could eliminate future labor shortfalls
in particular jobs—and determine how
long it would take to provide the training
needed for employees to make the switch.
assumptions about such things as growth
targets, emerging business models,
productivity increases, and new
technologies).
These forecasts—which can range in
sophistication from back-of-the-envelope
approximations to numbers produced by
computer simulation of different scenarios
—will yield estimates of anticipated
internal shortfalls (or surpluses) in each
job function over time.
The chart below shows a relatively simple
five-year forecast for one job function,
electrical planner.
To get a read on your overall internal
capacity risk, determine for each function
the extent of the risk (that is, the size of a
potential shortfall over time) and the
immediacy of the risk (how soon you are
27. likely to face a serious problem). Note that
here internal capacity risk will be
particularly acute in the case of the
system controllers, high-voltage
electricians, and electrical planners, who
will be in seriously short supply in a few
years.
Next, assess the external marketplace
risk, to see how difficult it will be to
alleviate shortfalls by hiring people from
outside the company when your need for
people is greatest. You should take into
account both the availability of workers
with the requisite skills and the intensity
of competition to hire those workers.
Combining your analyses of your internal
situation and the labor market will
highlight the job functions facing the
greatest threat (here, system controller
and high-voltage electrician) and those
that give little cause for concern (low-
voltage electrician). While there will be an
internal shortage of electrical planners,
those workers are expected to be in
plentiful supply in the labor market.
Start by estimating future workforce supply—that is, how many
available workers you will have for
each particular job function over the next five to 15 years. You
can calculate these anticipated
28. workforce levels by extending to individual jobs the analysis of
retirement and historical attrition
rates you did in the demographic quick check at the division and
location level.
Then calculate future workforce demand for each job function
by identifying what within your
strategy will drive personnel requirements, again taking into
account various scenarios. At RWE
Power, the demand for staff is tied both to anticipated growth—
for example, when planned power
plants will come on line—and to productivity gains. In more
volatile industries, like auto
manufacturing or banking, forecasting future staff needs by job
function is more challenging,
Safeguarding Knowledge
Retirement represents the loss of a worker
with the skills needed to perform a
specific job. It may also represent the loss
requiring the development of an array of scenarios. But an
assessment of even worst-case growth
scenarios in these industries will inevitably reveal the need for
immediate action in certain job
functions.
29. Combining these estimates of future workforce supply and
demand allows you to determine your
internal capacity risk. For each job function, you should be able
to tell both the extent of the risk
(the size of a potential shortfall—or, in some cases, a surplus)
and its immediacy (if a shortfall will
happen, when it is likely to occur.)
Using your categorization of jobs by functions, families, and
groups, you’ll be able to see how
difficult it will be to replace retiring workers with someone else
from within the company. A serious
internal capacity risk exists when there will be a significant
shortfall in the workers required for key
job functions in the short to medium term.
The analysis should also take into account that specialized jobs
may require a lengthy training and
certification period. In Germany, for example, it takes a three-
year apprenticeship to become an
electrician. Then it can require another two years to specialize
as a maintenance expert, and two
more to become an electrical master technician. So a company
needs to identify a shortfall in
electrical master technicians seven years before it occurs,
30. especially if it will be difficult to fill those
jobs with outside hires. In addition, depending on the degree of
off-the-job training required, it
might be necessary to have a surplus of workers for the jobs at
each of these stages so that some can
receive the training needed to advance to the next level before
the actual gap occurs. A traditional
three-year planning cycle won’t identify those risks in time to
respond to them.
Keep in mind, as well, that companies may face a shortfall not
simply of workers with needed skills
but of employees with crucial experience and knowledge—
particularly specialized knowledge about
the company and its practices. (To learn how U.S. truck maker
Freightliner addressed this risk, see
the sidebar “Safeguarding Knowledge.”)
The difficulty of closing a gap depends on the
availability of workers with the skills you need in
the labor market. Consequently, after
determining your internal capacity risk, you
of crucial knowledge whose value to the
31. organization extends far beyond the
worker’s individual position.
Freightliner, a large truck manufacturer
based in Portland, Oregon, has
anticipated this dual risk. The company (a
division of Daimler that recently changed
its name to Daimler Trucks North America)
saw that the imminent retirement of a
large cohort of its aging workforce
threatened the specialized technical skills
and deep knowledge of customer needs
required to produce the highly customized
trucks it was known for. Previously,
significant layoffs, voluntary severance
programs, and limited external recruiting
had resulted in a relatively old workforce.
In certain functions 30% to 50% of
Freightliner’s workforce would be eligible
32. for retirement by 2010. The cyclical nature
of its business made the staffing equation
even more difficult.
Once Freightliner recognized it faced a
serious potential problem, it set about
assessing the extent and severity of the
risk, focusing on employees who were key
knowledge holders. The challenge was to
identify these workers as a subset of the
workforce; to segment them based on
whether their knowledge was held by
them alone, by a few employees, or by
many employees; and to transfer their
knowledge so that it wouldn’t be lost to
the organization when they retired.
Using an in-depth survey of 5,000
employees, Freightliner classified
employees by the type of knowledge they
33. had. Across the company, about 20% of
the population emerged as “key
knowledge holders,” 9% as “unique key
knowledge holders,” and 3% as “at-risk,
unique key knowledge holders” (those
who were eligible to retire within five
should assess the external labor market risk,
again by job family and function. The extent of
the risk will be determined by the availability of
qualified workers and by the competition from
other companies to hire them.
The final step in determining capacity risk
involves combining the assessments of your
internal situation and of the external labor
market, to highlight which job functions will pose
the greatest threat. When it analyzed its
workforce trends, RWE Power found that it would
face a shortage within the company of certain
34. kinds of highly specialized engineers, that
relatively few of these engineers would be
entering the job market in coming years, and that
competition to hire them would be fierce among
the few large utility companies—creating a
capacity challenge for this job function.
Pinpoint potential productivity losses.
A similar approach, if a somewhat more
straightforward process, is used to gauge the risk
of lower productivity and other costs—such as
absenteeism and retraining costs—that can be
related to an aging workforce in certain job
categories. Again, the risk must be assessed at the
level of job group, family, and function, a process
that begins with looking at the age distribution of
employees in each category and how it will
change over time.
35. years). The risk posed by the departure of
this latter group varied significantly
among different functions. Segmenting
this crucial human resource by function
helped the company set up targeted
knowledge management systems, tandem
staffing arrangements, job rotations, and
other means to capture what these people
knew before they left the company.
Six Ways to Close the Talent
Gap
Having identified where you are likely to
face the greatest capacity risk, you need
to take steps to minimize it, particularly in
Then you’ll need to determine which job
functions are at risk—because of employees’ ages
and because of the nature of the work—for age-
related productivity losses. At the least, you’ll
want to differentiate between physically
36. demanding jobs, in which aging can lead to
reduced productivity, and experience-based jobs,
in which aging can lead to higher productivity.
Keep in mind that the implications of employee
aging will vary widely from job to job. Companies
need to understand those differences and develop specific
strategies for each job group.
The process of assessing your company’s capacity and
productivity risks by location, business unit,
and job category can reveal some daunting challenges—say, a
serious shortage of talent in an area
targeted for growth. The key is to identify such a problem far
enough in advance to be able to
address it and, in doing so, gain an advantage over your
competitors.
Managing the Risk
With detailed information about the demographic risk you face,
you’re in a position to
systematically employ an array of measures to manage both
capacity risk and productivity risk.
Take steps now to prevent talent shortages.
Future shortfalls in a critical job family or function, when
spotted early enough, can be mitigated in
37. two basic ways: by reducing the demand for workers in those
jobs and by increasing the supply of
people able to perform them. We’ll look at six methods for
closing the gap between workforce
supply and demand, beginning with two aimed at reducing
workforce requirements. (See the
sidebar “Six Ways to Close the Talent Gap.”)
An obvious but potentially overlooked method is
productivity improvement, achieved through
process enhancements, for instance, or technical
innovations. Most companies constantly seek to
positions critical to the organization’s
future success. This can be done by job
category, using a combination of
measures. They fall into two general
categories:
Reduce your future demand
for labor
increase productivity
outsource work
Increase your future supply
38. of qualified workers
transfer employees
train employees
increase employee retention
recruit more workers
improve productivity. But the potential for a
serious labor shortage in a particular job family or
function can focus those efforts.
Companies can also prioritize outsourcing in job
categories in which a labor shortage is looming—
particularly if the shortage looks temporary or if it
involves work that is of limited strategic
importance. Bear in mind, however, that if you
have problems recruiting in certain job categories,
your outsourcer probably faces the same
constraints, so outsourcing may provide only a
partial solution.
Maintaining an adequate supply of talent is
39. another key to managing potential gaps.
Companies that have categorized their jobs by
functions, families, and groups will have a good
read on the feasibility of job transfers. They can
tap a surplus in a job function or family at one
location or business unit to fill a gap in the same
function or family at another location or business unit—
provided they’ve laid the necessary
groundwork for transfers. RWE Power is considering how it can
help workers prepare for a potential
transfer to a similar but different job or to the same job at a
different power plant as the
organization’s production strategy changes.
Training programs play a key role in such preparations. The
capacity risk analysis enabled RWE
Power to spot, for instance, cross-training opportunities
between its different operations: After a
short learning period, a high-voltage electrician working on
large mining equipment can undertake
high-voltage tasks at a power plant, and vice versa. The ability
to map the potential for transfers and
training across job categories, business units, and locations
40. gives RWE Power a capability most large
companies lack. (See the exhibit “Sizing Up Your Transfer and
Training Options” for a simple
illustration of how training and transfers can be combined to
address gaps.)
Sizing Up Your Transfer and
Training Options
If you anticipate a shortfall in one job
function at one location in a given year (in
this simplified example, the deficit of 35
low-voltage electricians at Location 1), you
might be able to alleviate that problem by
training people from another job function,
in the same job family and at the same
location, in which there will be an
oversupply (the surplus of 26 high-voltage
electricians in Location 1). Although their
training might take up to 18 months, you
could begin it before the shortfall
materializes, because you have spotted
the problem early.
Alternatively, if you have identified a
surplus of workers in the same job
function at another location (the surplus
of 12 low-voltage technicians at Location
2), you could transfer some of them to fill
the shortage.
41. As we see here, the shortfall of low-
voltage electricians at Location 1 and the
shortfall of high-voltage electricians at
Location 2 would be eased through a
combination of training and transfers—
though there would still be a deficit of 19
workers. That would have to be addressed
through other measures, including hiring
from outside the company.
To ensure that attrition doesn’t exacerbate a
capacity shortfall, it is important to create
sophisticated retention programs targeted at
people in job functions at greatest risk of a talent
shortage. Initiatives include training, career
planning programs, and job rotation programs, as
well as more conventional long-term incentives.
At the minimum, you need to monitor employee
satisfaction and strive to increase it in job
categories facing a serious capacity risk. RWE
Power, for example, has carefully analyzed its
remuneration structure for certain types of
engineers.
42. Finally, having taken steps to minimize workforce
demand in crucial job categories and to
strengthen the supply of workers from within the
company, you must look outside the organization
for workers to fill any remaining gap. For many
companies, this fundamental business activity—
recruitment—has been a low priority during the
relentless downsizing of recent years. But
because of the major demographic shift now
occurring, developing sophisticated recruiting
programs—that focus not just on hiring more
people but on such things as the careful
positioning of the company brand with
prospective employees—are a top priority.
Companies must learn to target their recruiting
efforts by, for example, identifying specialized
schools that will turn out workers with the skills
required for jobs in at-risk categories. They need
43. to think ahead, beginning to recruit employees
whose skills may not be in demand today but will
be tomorrow, when shortages emerge. Companies
that anticipate their future needs and act now will
gain a clear competitive advantage over rivals that
are still focused on reducing head count.
This will require a radical change in mind-set for
companies that have been in a prolonged
downsizing mode. For RWE Power, it became
clear that, while it had the financial capital to
construct new power plants, human capital, in
the form of specialized engineers, was the scarce
resource. Consequently, the company launched
an intense effort to close the gap in the short term
—with, for example, focused recruiting drives at
certain universities—and developed a long-term recruitment
strategy for these positions. Other
possible responses to such a gap include reactivating retirees or
44. acquiring small companies that
have the sought-after talent.
Ensure that aging workers remain assets.
Initiatives focused on the needs of older workers can help
address the implications an aging
workforce has for productivity. A systematic review of current
HR policies and processes will reveal
adjustments you can make in a variety of areas to turn age-
related risks into competitive
opportunities. The key is to tailor these measures to each job
function or family, keeping in mind
that the experience that comes with age may increase
productivity in certain jobs, such as
engineering or sales positions.
The most obvious moves involve training programs that help
older workers update their skills and
leverage their experience. At RWE Power, the operational
technology at power plants has changed
significantly since older workers began at the company, and
continuing professional development
programs are crucial in maintaining these workers’ production
knowledge. A danger is that older
workers will be placed in one-age-fits-all courses that aren’t
geared to their particular needs,
45. knowledge, and strengths. For example, older manufacturing
employees’ lack of familiarity with the
internet may make typical web-based training programs
unappealing to them. Training older
employees in mixed-age groups can also reduce the value of
such programs: They may be
embarrassed to ask questions that younger employees might
scoff at. (It should be noted that the
reverse may also be true.)
Another obvious area for productivity enhancement is health
care management. On average, older
employees don’t become ill more often than younger employees,
they just are ill for longer periods.
Proactive measures, designed to prevent sickness and injury,
can reduce the problem significantly.
Such measures should be targeted at employees with a high risk
of health problems and tailored to
the jobs they do. They also need to include incentives to
encourage participation—say, the offer of
additional vacation days to employees who regularly engage in
exercise, which has been shown to
reduce illness-related absences among older workers.
46. In many cases, workplace accommodations designed to help
older workers on the job can increase
productivity. With manual work, companies may focus on
enhancing workplace design or revising
employees’ duties—say, by rotating them during the course of a
day among tasks that are more and
less physically demanding. RWE Power, which has found that
aging could reduce productivity in
production-related job families, is exploring the possibility of
personalized work schedules, with
shift lengths tailored to employees’ abilities, and of “lifetime
working programs,” in which
employees can accumulate early in their careers credit for
overtime hours that can be used to reduce
work hours when they are older.
In a twist on the outsourcing that accompanies most downsizing
initiatives, companies might also
consider the strategic “insourcing” of certain jobs as a way to
accommodate the abilities of older
workers. That is, less physically demanding tasks currently
performed by outside contractors could
be brought back into the company and assigned to older workers
who are guaranteed employment
47. by their contract or by job protection laws but may no longer
perform well in their current positions.
Initiatives may also involve developing new compensation
structures. The traditional link between
pay and length of service (and hence age) may need to be
loosened, and compensation—for certain
activities, at least—more closely linked to performance.
Although under such a system, some older
workers may be compensated less than they would have been
under the existing system, note again
that, in many job categories, knowledge and experience may in
fact lead to superior performance
and higher pay.
While some older workers become more engaged with their jobs
(say, after their children have left
home and their domestic responsibilities lessen), others become
less motivated because they
perceive they have fewer career opportunities. To counter a
potential loss of motivation as workers
approach retirement, companies can try creative age-related
performance incentives. For example,
older workers might serve as mentors to new workers, which
can increase motivation and
48. performance. Employees with critical knowledge might be
offered the chance to return to the
company and work on special projects on a freelance basis after
they’ve retired. This latter approach
has multiple benefits: reducing capacity shortfalls in a crucial
job category and keeping valuable
knowledge in the company, as well as motivating employees
near retirement to perform well so that
they will be considered for this post-retirement opportunity.
Addressing Tomorrow’s Problem Today
The demographic shift looming on the horizon will radically
reshape our workforces. As its impact
becomes more obvious, many companies will realize that they
must undertake a monumental,
multiyear change-management program—one that represents an
opportunity as well as a response
to a significant challenge.
As we’ve noted, actively addressing demographic risk to retain
the skills and know-how needed to
ensure future viability can give companies a competitive
advantage over rivals. That means
demographic risk management must be an integral part of yearly
strategy setting. Furthermore,
49. because demographic risk management is not a onetime
initiative but an ongoing part of strategy
and risk discussions, the HR department will need to become a
true strategic partner of top
management—a role that HR should have assumed long ago, in
any case.
Retirees with critical knowledge might be
offered the chance to return to the company
and work on special projects.
There is no time to waste: Recall the seven-year lead required to
train the German master electrical
technician. Companies must adopt a demographic risk
management approach now—before their
competitors do and before it is too late to effectively respond to
the changes that lie ahead.
A version of this article appeared in the February 2008 issue of
Harvard Business Review.
Rainer Strack ([email protected]) is a partner and managing dire
ctor,
Jens Baier ([email protected]) is a principal, and
Anders Fahlander ([email protected]) is a senior partner and ma
naging director of the Boston Consulting Group.
50. Strack, a coauthor of “The Surprising Economics of a ‘People B
usiness’” (HBR June 2005), and Baier are based in
Düsseldorf, Germany; Fahlander is based in San Francisco.
Related Topics: HUMAN RESOURCE MANAGEMENT |
EMPLOYEE RETENTION | DEMOGRAPHICS
This article is about ECONOMY
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51. become the property of
Harvard Business Publishing.
STRATEGIC PLANNING
Managing Risks: A New
Framework
by Robert S. Kaplan and Anette Mikes
FROM THE JUNE 2012 ISSUE
W
Editors’ Note: Since this issue of HBR went to press, JP
Morgan, whose risk management practices are
highlighted in this article, revealed significant trading losses at
one of its units. The authors provide
their commentary on this turn of events in their contribution to
HBR’s Insight Center on Managing
Risky Behavior.
hen Tony Hayward became CEO of BP, in 2007, he vowed to
make safety his top
priority. Among the new rules he instituted were the
requirements that all
employees use lids on coffee cups while walking and refrain
from texting while
52. driving. Three years later, on Hayward’s watch, the Deepwater
Horizon oil rig exploded in the Gulf
of Mexico, causing one of the worst man-made disasters in
history. A U.S. investigation commission
attributed the disaster to management failures that crippled “the
ability of individuals involved to
identify the risks they faced and to properly evaluate,
communicate, and address them.” Hayward’s
story reflects a common problem. Despite all the rhetoric and
money invested in it, risk
management is too often treated as a compliance issue that can
be solved by drawing up lots of rules
and making sure that all employees follow them. Many such
rules, of course, are sensible and do
reduce some risks that could severely damage a company. But
rules-based risk management will not
diminish either the likelihood or the impact of a disaster such as
Deepwater Horizon, just as it did
not prevent the failure of many financial institutions during the
2007–2008 credit crisis.
Identifying and Managing
Preventable Risks
53. In this article, we present a new categorization of risk that
allows executives to tell which risks can
be managed through a rules-based model and which require
alternative approaches. We examine
the individual and organizational challenges inherent in
generating open, constructive discussions
about managing the risks related to strategic choices and argue
that companies need to anchor these
discussions in their strategy formulation and implementation
processes. We conclude by looking at
how organizations can identify and prepare for nonpreventable
risks that arise externally to their
strategy and operations.
Managing Risk: Rules or Dialogue?
The first step in creating an effective risk-management system
is to understand the qualitative
distinctions among the types of risks that organizations face.
Our field research shows that risks fall
into one of three categories. Risk events from any category can
be fatal to a company’s strategy and
even to its survival.
Category I: Preventable risks.
These are internal risks, arising from within the organization,
that are controllable and ought to be
54. eliminated or avoided. Examples are the risks from employees’
and managers’ unauthorized, illegal,
unethical, incorrect, or inappropriate actions and the risks from
breakdowns in routine operational
processes. To be sure, companies should have a zone of
tolerance for defects or errors that would
not cause severe damage to the enterprise and for which
achieving complete avoidance would be
too costly. But in general, companies should seek to eliminate
these risks since they get no strategic
benefits from taking them on. A rogue trader or an employee
bribing a local official may produce
some short-term profits for the firm, but over time such actions
will diminish the company’s value.
This risk category is best managed through active prevention:
monitoring operational processes and
guiding people’s behaviors and decisions toward desired norms.
Since considerable literature
already exists on the rules-based compliance approach, we refer
interested readers to the sidebar
“Identifying and Managing Preventable Risks” in lieu of a full
discussion of best practices here.
Category II: Strategy risks.
A company voluntarily accepts some risk in order
55. to generate superior returns from its strategy. A
bank assumes credit risk, for example, when it
Companies cannot anticipate every
circumstance or conflict of interest that an
employee might encounter.
Thus, the first line of defense against
preventable risk events is to provide
guidelines clarifying the company’s goals
and values.
The Mission
A well-crafted mission statement
articulates the organization’s fundamental
purpose, serving as a “true north” for all
employees to follow. The first sentence of
Johnson & Johnson’s renowned credo, for
instance, states, “We believe our first
responsibility is to the doctors, nurses and
patients, to mothers and fathers, and all
others who use our products and
services,” making clear to all employees
whose interests should take precedence in
any situation. Mission statements should
be communicated to and understood by
all employees.
The Values
Companies should articulate the values
56. that guide employee behavior toward
principal stakeholders, including
customers, suppliers, fellow employees,
communities, and shareholders. Clear
value statements help employees avoid
violating the company’s standards and
putting its reputation and assets at risk.
The Boundaries
A strong corporate culture clarifies what is
not allowed. An explicit definition of
boundaries is an effective way to control
actions. Consider that nine of the Ten
Commandments and nine of the first 10
amendments to the U.S. Constitution
(commonly known as the Bill of Rights) are
written in negative terms. Companies
need corporate codes of business conduct
lends money; many companies take on risks
through their research and development
activities.
Strategy risks are quite different from preventable
risks because they are not inherently undesirable.
A strategy with high expected returns generally
requires the company to take on significant risks,
and managing those risks is a key driver in
57. capturing the potential gains. BP accepted the
high risks of drilling several miles below the
surface of the Gulf of Mexico because of the high
value of the oil and gas it hoped to extract.
Strategy risks cannot be managed through a rules-
based control model. Instead, you need a risk-
management system designed to reduce the
probability that the assumed risks actually
materialize and to improve the company’s ability
to manage or contain the risk events should they
occur. Such a system would not stop companies
from undertaking risky ventures; to the contrary,
it would enable companies to take on higher-risk,
higher-reward ventures than could competitors
with less effective risk management.
Category III: External risks.
Some risks arise from events outside the company
and are beyond its influence or control. Sources of
these risks include natural and political disasters
58. and major macroeconomic shifts. External risks
require yet another approach. Because companies
cannot prevent such events from occurring, their
that prescribe behaviors relating to
conflicts of interest, antitrust issues, trade
secrets and confidential information,
bribery, discrimination, and harassment.
Of course, clearly articulated statements
of mission, values, and boundaries don’t
in themselves ensure good behavior. To
counter the day-to-day pressures of
organizational life, top managers must
serve as role models and demonstrate
that they mean what they say. Companies
must institute strong internal control
systems, such as the segregation of duties
and an active whistle-blowing program, to
reduce not only misbehavior but also
temptation. A capable and independent
internal audit department tasked with
continually checking employees’
compliance with internal controls and
standard operating processes also will
deter employees from violating company
procedures and policies and can detect
violations when they do occur.
See also Robert Simons’s article on
managing preventable risks, “How Risky Is
59. Your Company?” (HBR May 1999), and his
book Levers of Control (Harvard Business
School Press, 1995).
management must focus on identification (they
tend to be obvious in hindsight) and mitigation of
their impact.
Companies should tailor their risk-management
processes to these different categories. While a
compliance-based approach is effective for
managing preventable risks, it is wholly
inadequate for strategy risks or external risks,
which require a fundamentally different approach
based on open and explicit risk discussions. That,
however, is easier said than done; extensive
behavioral and organizational research has shown
that individuals have strong cognitive biases that
discourage them from thinking about and
discussing risk until it’s too late.
Why Risk Is Hard to Talk About
60. Multiple studies have found that people
overestimate their ability to influence events that,
in fact, are heavily determined by chance. We
tend to be overconfident about the accuracy of our
forecasts and risk assessments and far too narrow
in our assessment of the range of outcomes that
may occur.
We also anchor our estimates to readily available evidence
despite the known danger of making
linear extrapolations from recent history to a highly uncertain
and variable future. We often
compound this problem with a confirmation bias, which drives
us to favor information that supports
our positions (typically successes) and suppress information
that contradicts them (typically
failures). When events depart from our expectations, we tend to
escalate commitment, irrationally
directing even more resources to our failed course of action—
throwing good money after bad.
Organizational biases also inhibit our ability to discuss risk and
failure. In particular, teams facing
61. uncertain conditions often engage in groupthink: Once a course
of action has gathered support
within a group, those not yet on board tend to suppress their
objections—however valid—and fall in
line. Groupthink is especially likely if the team is led by an
overbearing or overconfident manager
who wants to minimize conflict, delay, and challenges to his or
her authority.
Collectively, these individual and organizational biases explain
why so many companies overlook or
misread ambiguous threats. Rather than mitigating risk, firms
actually incubate risk through the
normalization of deviance,as they learn to tolerate apparently
minor failures and defects and treat
early warning signals as false alarms rather than alerts to
imminent danger.
Effective risk-management processes must counteract those
biases. “Risk mitigation is painful, not
a natural act for humans to perform,” says Gentry Lee, the chief
systems engineer at Jet Propulsion
Laboratory (JPL), a division of the U.S. National Aeronautics
and Space Administration. The rocket
scientists on JPL project teams are top graduates from elite
universities, many of whom have never
62. experienced failure at school or work. Lee’s biggest challenge
in establishing a new risk culture at
JPL was to get project teams to feel comfortable thinking and
talking about what could go wrong
with their excellent designs.
Rules about what to do and what not to do won’t help here. In
fact, they usually have the opposite
effect, encouraging a checklist mentality that inhibits challenge
and discussion. Managing strategy
risks and external risks requires very different approaches. We
start by examining how to identify
and mitigate strategy risks.
Managing Strategy Risks
Over the past 10 years of study, we’ve come across three
distinct approaches to managing strategy
risks. Which model is appropriate for a given firm depends
largely on the context in which an
organization operates. Each approach requires quite different
structures and roles for a risk-
management function, but all three encourage employees to
challenge existing assumptions and
debate risk information. Our finding that “one size does not fit
all” runs counter to the efforts of
63. regulatory authorities and professional associations to
standardize the function.
Independent experts.
Some organizations—particularly those like JPL that push the
envelope of technological innovation
—face high intrinsic risk as they pursue long, complex, and
expensive product-development
projects. But since much of the risk arises from coping with
known laws of nature, the risk changes
slowly over time. For these organizations, risk management can
be handled at the project level.
JPL, for example, has established a risk review board made up
of independent technical experts
whose role is to challenge project engineers’ design, risk-
assessment, and risk-mitigation decisions.
The experts ensure that evaluations of risk take place
periodically throughout the product-
development cycle. Because the risks are relatively unchanging,
the review board needs to meet
only once or twice a year, with the project leader and the head
of the review board meeting
quarterly.
64. The risk review board meetings are intense, creating what
Gentry Lee calls “a culture of intellectual
confrontation.” As board member Chris Lewicki says, “We tear
each other apart, throwing stones
and giving very critical commentary about everything that’s
going on.” In the process, project
engineers see their work from another perspective. “It lifts their
noses away from the grindstone,”
Lewicki adds.
The meetings, both constructive and confrontational, are not
intended to inhibit the project team
from pursuing highly ambitious missions and designs. But they
force engineers to think in advance
about how they will describe and defend their design decisions
and whether they have sufficiently
considered likely failures and defects. The board members,
acting as devil’s advocates,
counterbalance the engineers’ natural overconfidence, helping
to avoid escalation of commitment
to projects with unacceptable levels of risk.
At JPL, the risk review board not only promotes vigorous
debate about project risks but also has
authority over budgets. The board establishes cost and time
65. reserves to be set aside for each project
component according to its degree of innovativeness. A simple
extension from a prior mission
would require a 10% to 20% financial reserve, for instance,
whereas an entirely new component that
had yet to work on Earth—much less on an unexplored planet—
could require a 50% to 75%
contingency. The reserves ensure that when problems inevitably
arise, the project team has access
to the money and time needed to resolve them without
jeopardizing the launch date. JPL takes the
estimates seriously; projects have been deferred or canceled if
funds were insufficient to cover
recommended reserves.
Facilitators.
Many organizations, such as traditional energy and water
utilities, operate in stable technological
and market environments, with relatively predictable customer
demand. In these situations risks
stem largely from seemingly unrelated operational choices
across a complex organization that
accumulate gradually and can remain hidden for a long time.
66. Since no single staff group has the knowledge to perform
operational-level risk management across
diverse functions, firms may deploy a relatively small central
risk-management group that collects
information from operating managers. This increases managers’
awareness of the risks that have
been taken on across the organization and provides decision
makers with a full picture of the
company’s risk profile.
We observed this model in action at Hydro One, the Canadian
electricity company. Chief risk officer
John Fraser, with the explicit backing of the CEO, runs dozens
of workshops each year at which
employees from all levels and functions identify and rank the
principal risks they see to the
company’s strategic objectives. Employees use an anonymous
voting technology to rate each risk,
on a scale of 1 to 5, in terms of its impact, the likelihood of
occurrence, and the strength of existing
controls. The rankings are discussed in the workshops, and
employees are empowered to voice and
debate their risk perceptions. The group ultimately develops a
consensus view that gets recorded on
a visual risk map, recommends action plans, and designates an
67. “owner” for each major risk.
Risk management is painful—not a natural act
for humans to perform.
The danger from embedding risk managers
within the line organization is that they “go
native”—becoming deal makers rather than
deal questioners.
Hydro One strengthens accountability by linking capital
allocation and budgeting decisions to
identified risks. The corporate-level capital-planning process
allocates hundreds of millions of
dollars, principally to projects that reduce risk effectively and
efficiently. The risk group draws upon
technical experts to challenge line engineers’ investment plans
and risk assessments and to provide
independent expert oversight to the resource allocation process.
At the annual capital allocation
meeting, line managers have to defend their proposals in front
of their peers and top executives.
Managers want their projects to attract funding in the risk-based
capital planning process, so they
learn to overcome their bias to hide or minimize the risks in
their areas of accountability.
68. Embedded experts.
The financial services industry poses a unique challenge
because of the volatile dynamics of asset
markets and the potential impact of decisions made by
decentralized traders and investment
managers. An investment bank’s risk profile can change
dramatically with a single deal or major
market movement. For such companies, risk management
requires embedded experts within the
organization to continuously monitor and influence the
business’s risk profile, working side by side
with the line managers whose activities are generating new
ideas, innovation, and risks—and, if all
goes well, profits.
JP Morgan Private Bank adopted this model in 2007, at the
onset of the global financial crisis. Risk
managers, embedded within the line organization, report to both
line executives and a centralized,
independent risk-management function. The face-to-face contact
with line managers enables the
market-savvy risk managers to continually ask “what if ”
questions, challenging the assumptions of
portfolio managers and forcing them to look at different
scenarios. Risk managers assess how
69. proposed trades affect the risk of the entire investment
portfolio, not only under normal
circumstances but also under times of extreme stress, when the
correlations of returns across
different asset classes escalate. “Portfolio managers come to me
with three trades, and the [risk]
model may say that all three are adding to the same type of
risk,” explains Gregoriy Zhikarev, a risk
manager at JP Morgan. “Nine times out of 10 a manager will
say, ‘No, that’s not what I want to do.’
Then we can sit down and redesign the trades.”
The chief danger from embedding risk managers within the line
organization is that they “go
native,” aligning themselves with the inner circle of the
business unit’s leadership team—becoming
deal makers rather than deal questioners. Preventing this is the
responsibility of the company’s
Understanding the Three
Categories of Risk
The risks that companies face fall into
three categories, each of which requires a
different risk-management approach.
Preventable risks, arising from within an
organization, are monitored and
controlled through rules, values, and
70. standard compliance tools. In contrast,
strategy risks and external risks require
distinct processes that encourage
managers to openly discuss risks and find
cost-effective ways to reduce the
likelihood of risk events or mitigate their
consequences.
senior risk officer and—ultimately—the CEO, who sets the tone
for a company’s risk culture.
Avoiding the Function Trap
Even if managers have a system that promotes rich discussions
about risk, a second cognitive-
behavioral trap awaits them. Because many strategy risks (and
some external risks) are quite
predictable—even familiar—companies tend to label and
compartmentalize them, especially along
business function lines. Banks often manage what they label
“credit risk,” “market risk,” and
“operational risk” in separate groups. Other companies
compartmentalize the management of
“brand risk,” “reputation risk,” “supply chain risk,” “human
resources risk,” “IT risk,” and “financial
risk.”
Such organizational silos disperse both
information and responsibility for effective risk
71. management. They inhibit discussion of how
different risks interact. Good risk discussions
must be not only confrontational but also
integrative. Businesses can be derailed by a
combination of small events that reinforce one
another in unanticipated ways.
Managers can develop a companywide risk
perspective by anchoring their discussions in
strategic planning, the one integrative process
that most well-run companies already have. For
example, Infosys, the Indian IT services company,
generates risk discussions from the Balanced
Scorecard, its management tool for strategy
measurement and communication. “As we asked
ourselves about what risks we should be looking
at,” says M.D. Ranganath, the chief risk officer,
“we gradually zeroed in on risks to business
objectives specified in our corporate scorecard.”
72. The Risk Event Card The Risk Report Card
In building its Balanced Scorecard, Infosys had
identified “growing client relationships” as a key
objective and selected metrics for measuring
progress, such as the number of global clients
with annual billings in excess of $50 million and
the annual percentage increases in revenues from
large clients. In looking at the goal and the
performance metrics together, management
realized that its strategy had introduced a new
risk factor: client default. When Infosys’s
business was based on numerous small clients, a
single client default would not jeopardize the
company’s strategy. But a default by a $50 million
client would present a major setback. Infosys
began to monitor the credit default swap rate of
every large client as a leading indicator of the
73. likelihood of default. When a client’s rate
increased, Infosys would accelerate collection of
receivables or request progress payments to
reduce the likelihood or impact of default.
To take another example, consider Volkswagen do Brasil
(subsequently abbreviated as VW), the
Brazilian subsidiary of the German carmaker. VW’s risk-
management unit uses the company’s
strategy map as a starting point for its dialogues about risk. For
each objective on the map, the group
identifies the risk events that could cause VW to fall short of
that objective. The team then generates
a Risk Event Card for each risk on the map, listing the practical
effects of the event on operations,
the probability of occurrence, leading indicators, and potential
actions for mitigation. It also
identifies who has primary accountability for managing the risk.
(See the exhibit “The Risk Event
Card.”) The risk team then presents a high-level summary of
results to senior management. (See
“The Risk Report Card.”)
74. VW do Brasil uses risk event cards to
assess its strategy risks. First, managers
document the risks associated with
achieving each of the company’s strategic
objectives. For each identified risk,
managers create a risk card that lists the
practical effects of the event’s occurring
on operations. Below is a sample card
looking at the effects of an interruption in
deliveries, which could jeopardize VW’s
strategic objective of achieving a smoothly
functioning supply chain.
VW do Brasil summarizes its strategy risks
on a Risk Report Card organized by
strategic objectives (excerpt below).
Managers can see at a glance how many of
the identified risks for each objective are
critical and require attention or
mitigation. For instance, VW identified 11
risks associated with achieving the goal
“Satisfy the customer’s expectations.”
Four of the risks were critical, but that was
an improvement over the previous
quarter’s assessment. Managers can also
monitor progress on risk management
across the company.
Beyond introducing a systematic process for identifying and
mitigating strategy risks, companies
also need a risk oversight structure. Infosys uses a dual
structure: a central risk team that identifies
general strategy risks and establishes central policy, and
75. specialized functional teams that design
and monitor policies and controls in consultation with local
business teams. The decentralized
teams have the authority and expertise to help the business lines
respond to threats and changes in
their risk profiles, escalating only the exceptions to the central
risk team for review. For example, if a
client relationship manager wants to give a longer credit period
to a company whose credit risk
parameters are high, the functional risk manager can send the
case to the central team for review.
These examples show that the size and scope of the risk
function are not dictated by the size of the
organization. Hydro One, a large company, has a relatively
small risk group to generate risk
awareness and communication throughout the firm and to advise
the executive team on risk-based
resource allocations. By contrast, relatively small companies or
units, such as JPL or JP Morgan
Private Bank, need multiple project-level review boards or
teams of embedded risk managers to
apply domain expertise to assess the risk of business decisions.
And Infosys, a large company with
76. broad operational and strategic scope, requires a strong
centralized risk-management function as
well as dispersed risk managers who support local business
decisions and facilitate the exchange of
information with the centralized risk group.
Managing the Uncontrollable
External risks, the third category of risk, cannot typically be
reduced or avoided through the
approaches used for managing preventable and strategy risks.
External risks lie largely outside the
company’s control; companies should focus on identifying
them, assessing their potential impact,
and figuring out how best to mitigate their effects should they
occur.
Some external risk events are sufficiently imminent that
managers can manage them as they do
their strategy risks. For example, during the economic
slowdown after the global financial crisis,
Infosys identified a new risk related to its objective of
developing a global workforce: an upsurge in
protectionism, which could lead to tight restrictions on work
visas and permits for foreign nationals
in several OECD countries where Infosys had large client
77. engagements. Although protectionist
legislation is technically an external risk since it’s beyond the
company’s control, Infosys treated it
as a strategy risk and created a Risk Event Card for it, which
included a new risk indicator: the
number and percentage of its employees with dual citizenships
or existing work permits outside
India. If this number were to fall owing to staff turnover,
Infosys’s global strategy might be
jeopardized. Infosys therefore put in place recruiting and
retention policies that mitigate the
consequences of this external risk event.
Most external risk events, however, require a different analytic
approach either because their
probability of occurrence is very low or because managers find
it difficult to envision them during
their normal strategy processes. We have identified several
different sources of external risks:
Natural and economic disasters with immediate impact. These
risks are predictable in a general
way, although their timing is usually not (a large earthquake
will hit someday in California, but
there is no telling exactly where or when). They may be
anticipated only by relatively weak
78. signals. Examples include natural disasters such as the 2010
Icelandic volcano eruption that
closed European airspace for a week and economic disasters
such as the bursting of a major asset
price bubble. When these risks occur, their effects are typically
drastic and immediate, as we saw
in the disruption from the Japanese earthquake and tsunami in
2011.
Geopolitical and environmental changes with long-term impact.
These include political shifts such
as major policy changes, coups, revolutions, and wars; long-
term environmental changes such as
global warming; and depletion of critical natural resources such
as fresh water.
Competitive risks with medium-term impact. These include the
emergence of disruptive
technologies (such as the internet, smartphones, and bar codes)
and radical strategic moves by
industry players (such as the entry of Amazon into book
retailing and Apple into the mobile
phone and consumer electronics industries).
Companies use different analytic approaches for each of the
79. sources of external risk.
Tail-risk stress tests.
Stress-testing helps companies assess major changes in one or
two specific variables whose effects
would be major and immediate, although the exact timing is not
forecastable. Financial services
firms use stress tests to assess, for example, how an event such
as the tripling of oil prices, a large
swing in exchange or interest rates, or the default of a major
institution or sovereign country would
affect trading positions and investments.
The benefits from stress-testing, however, depend critically on
the assumptions—which may
themselves be biased—about how much the variable in question
will change. The tail-risk stress
tests of many banks in 2007–2008, for example, assumed a
worst-case scenario in which U.S.
housing prices leveled off and remained flat for several periods.
Very few companies thought to test
what would happen if prices began to decline—an excellent
example of the tendency to anchor
estimates in recent and readily available data. Most companies
extrapolated from recent U.S.
housing prices, which had gone several decades without a
80. general decline, to develop overly
optimistic market assessments.
Scenario planning.
A firm’s ability to weather storms depends on
how seriously executives take risk management
when the sun is shining and no clouds are on
the horizon.
This tool is suited for long-range analysis, typically five to 10
years out. Originally developed at Shell
Oil in the 1960s, scenario analysis is a systematic process for
defining the plausible boundaries of
future states of the world. Participants examine political,
economic, technological, social,
regulatory, and environmental forces and select some number of
drivers—typically four—that would
have the biggest impact on the company. Some companies
explicitly draw on the expertise in their
advisory boards to inform them about significant trends, outside
the company’s and industry’s day-
to-day focus, that should be considered in their scenarios.
For each of the selected drivers, participants estimate maximum
and minimum anticipated values
81. over five to 10 years. Combining the extreme values for each of
four drivers leads to 16 scenarios.
About half tend to be implausible and are discarded;
participants then assess how their firm’s
strategy would perform in the remaining scenarios. If managers
see that their strategy is contingent
on a generally optimistic view, they can modify it to
accommodate pessimistic scenarios or develop
plans for how they would change their strategy should early
indicators show an increasing
likelihood of events turning against it.
War-gaming.
War-gaming assesses a firm’s vulnerability to disruptive
technologies or changes in competitors’
strategies. In a war-game, the company assigns three or four
teams the task of devising plausible
near-term strategies or actions that existing or potential
competitors might adopt during the next
one or two years—a shorter time horizon than that of scenario
analysis. The teams then meet to
examine how clever competitors could attack the company’s
strategy. The process helps to
overcome the bias of leaders to ignore evidence that runs
counter to their current beliefs, including
82. the possibility of actions that competitors might take to disrupt
their strategy.
Companies have no influence over the likelihood of risk events
identified through methods such as
tail-risk testing, scenario planning, and war-gaming. But
managers can take specific actions to
mitigate their impact. Since moral hazard does not arise for
nonpreventable events, companies can
use insurance or hedging to mitigate some risks, as an airline
does when it protects itself against
sharp increases in fuel prices by using financial derivatives.
Another option is for firms to make
investments now to avoid much higher costs later. For instance,
a manufacturer with facilities in
earthquake-prone areas can increase its construction costs to
protect critical facilities against severe
quakes. Also, companies exposed to different but comparable
risks can cooperate to mitigate them.
For example, the IT data centers of a university in North
Carolina would be vulnerable to hurricane
risk while those of a comparable university on the San Andreas
Fault in California would be
vulnerable to earthquakes. The likelihood that both disasters
83. would happen on the same day is
small enough that the two universities might choose to mitigate
their risks by backing up each
other’s systems every night.
The Leadership Challenge
Managing risk is very different from managing strategy. Risk
management focuses on the negative—
threats and failures rather than opportunities and successes. It
runs exactly counter to the “can do”
culture most leadership teams try to foster when implementing
strategy. And many leaders have a
tendency to discount the future; they’re reluctant to spend time
and money now to avoid an
uncertain future problem that might occur down the road, on
someone else’s watch. Moreover,
mitigating risk typically involves dispersing resources and
diversifying investments, just the
opposite of the intense focus of a successful strategy. Managers
may find it antithetical to their
culture to champion processes that identify the risks to the
strategies they helped to formulate.
For those reasons, most companies need a separate function to
handle strategy- and external-risk
84. management. The risk function’s size will vary from company
to company, but the group must
report directly to the top team. Indeed, nurturing a close
relationship with senior leadership will
arguably be its most critical task; a company’s ability to
weather storms depends very much on how
seriously executives take their risk-management function when
the sun is shining and no clouds are
on the horizon.
That was what separated the banks that failed in the financial
crisis from those that survived. The
failed companies had relegated risk management to a
compliance function; their risk managers had
limited access to senior management and their boards of
directors. Further, executives routinely
ignored risk managers’ warnings about highly leveraged and
concentrated positions. By contrast,
Goldman Sachs and JPMorgan Chase, two firms that weathered
the financial crisis well, had strong
internal risk-management functions and leadership teams that
understood and managed the
companies’ multiple risk exposures. Barry Zubrow, chief risk
officer at JP Morgan Chase, told us, “I
may have the title, but [CEO] Jamie Dimon is the chief risk
85. officer of the company.” Risk
management is nonintuitive; it runs counter to many individual
and organizational biases. Rules
and compliance can mitigate some critical risks but not all of
them. Active and cost-effective risk
management requires managers to think systematically about the
multiple categories of risks they
face so that they can institute appropriate processes for each.
These processes will neutralize their
managerial bias of seeing the world as they would like it to be
rather than as it actually is or could
possibly become.
A version of this article appeared in the June 2012 issue of Harv
ard Business Review.
Robert S. Kaplan is a senior fellow and the Marvin Bower Profe
ssor of Leadership
Development, Emeritus, at Harvard Business School. He is a co
author, with Michael E. Porter, of “How
to Solve the Cost Crisis in Health Care” (HBR, September 2011
).
Anette Mikes is an assistant professor in the accounting and ma
nagement unit at Harvard
86. Business School.
Related Topics: RISK MANAGEMENT | STRATEGY
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Michael Ellegood, P.E. 6 months ago
An interesting article, but one that I am having difficulty in tran
slating into the practice of public project delivery.
Most public projects (roads, bridges, public infrastructure) are d
elivered late and over budget. There are a variety of
causes one of which is poor or nonexistent risk recognition, anal
ysis and management. Yet when you consider the
causes of project failure they usually boil down to one or more
of five very common causes (ROW, utilities, public
acceptance, underground surprises, permitting). I also take issue
with the "non-intuitive" comment, if the
87. organizational culture promotes risk awareness, then it becomes
very intuitive. As an example, take some flying
lessons, your instructor will make risk awareness and manageme
nt very intuitive.
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STRATEGY
A Short Guide to Strategy for
Entrepreneurs
by Kevin J. Boudreau
OCTOBER 17, 2017
88. ILYAKALININ/ISTOCK
It sometimes appears that the traditional rules of business are
being upended by today’s mega-
trends of multisided platforms, big data, machine learning and
AI, crowdsourcing, the internet of
things (IoT), and more. These trends have transformed the
world of business immeasurably. But
they have certainly not repealed the timeless rules of strategy.
Yet for too many entrepreneurs, especially those steeped in tech
and devoted to product, strategy
often seems to be an afterthought. Experiment and create a great
product, the thinking goes, then
scale, and then figure out the business model once you’ve
succeeded. It’s true that nothing beats
having a compelling product that customers badly want.
However, while good products and good
“shopkeeping” are surely good business, they are no substitute
for clear-minded strategy.
Savvy entrepreneurs and business founders might come across
any number of tool kits and
frameworks — from jobs to be done to business model
canvases to disruptive business models and
89. industry forces, all while seeking blue oceans, and so on. Each
of these has value and can be the
source of useful ideas, but each represents only part of what
strategy can offer.
The challenge of strategy is to develop an integrated view of the
workings of your business and how
it creates and captures value within its operating environment.
So, rather than develop allegiance to
one piece of the strategy puzzle, founders are best served by
familiarizing themselves with the basic
tenets of the field.
What’s more, my academic research on strategy in the contexts
of multisided platforms, crowds, big
data, machine learning, and IoT shows that it is only when
timeless tenets are applied that
entrepreneurs can sensibly plot strategy. Today’s strategy is just
too complex, dynamic, and
demanding to rely on partial storylines.
As a professor teaching strategy, most recently at Harvard
Business School and Northeastern
University, I have tried to offer the minimum essential
explanation of an integrated view of strategy,
to combine the best of the many frameworks that exist, show
how they relate to one another, and
90. distill the field to the essentials that entrepreneurs need to know
to get started.
I’ve published my notes to that effect in a hundred-page
working paper, and I won’t try to sum
up the entire effort here. Strategy is hard work, and there are no
magic shortcuts. What I offer here is
a starting point: the most basic questions that every successful
business must answer.
Entrepreneurs who design their business around these questions
will have a leg up when it comes to
crafting strategy.
To begin, you can sketch out your answers to these questions on
a single index card.
What Value Are You Intending to Create, and for Whom?
Customers buy products and services because they perceive
value in them. The first step toward a
successful strategy is to clarify how you plan to create value,
and for whom. That means defining
who your customers are. That’s the first blank space on the
index card above: Whom are you
serving? Your customers may be defined by any number of
attributes — age, geography, interests,
91. the particular scenario or use case they find themselves in, or
any number of other things.
The next step is to define your value proposition, also known,
among other things, as a job to be
done or a problem you intend to solve. That’s the second space:
What are you offering? This is an
area of strategy that greatly overlaps with other fields such as
design thinking, and there is endless
reading and an endless numbers of frameworks and practices
you can refer to. Central questions to
ask include: What dimensions of a solution does your customer
value — speed, cost,
customizability? In what dimensions is your solution better than
the competition? Where is it at
parity? Where is it worse? (Remember, it is usually not possible
to be better than the competition on
each and every dimension.)
You can think of the value you intend to create in a marketplace
as akin to a position on a game
board. Your position is defined by the combination of your
customer scope and your value
proposition. The best imaginable position is to offer a product
that is highly valued and demanded
92. by customers and sufficiently unique as to defy duplication by
competitors (more on that in a bit).
If you’re not sure how to answer these first two questions, think
about your customers and their
preferences. What do they want more of, and what do they want
less of ? For example, perhaps your
customers value both variety and lower prices. How do you
compare with competitors along those
dimensions? Perhaps your value proposition is to offer the
lowest possible price, but at the expense
of the variety offered by your competitors.
How Do You Plan to Deliver That Value?
In plotting your position in the market, defining how you’ll
create value and for whom, you also
need to define your operating model. The operating model is the
set of choices and practices
defining how to carry out the business. This will typically imply
a set of trade-offs in trying to find a
combination of activities that allows you to stake out your
position — delivering certain dimensions
of your solution better than the competition.
This may be the most difficult of the questions listed above,
93. since designing the operating model
means sorting out choices across the entire enterprise that need
to work together. A successful
operating model is more than just “how you make money”; it’s a
set of decisions that together
create more value than each would on its own. It’s about doing
things that reinforce each other, to
create a whole that’s more valuable than the sum of its parts.
To get started, think about the steps in your value chain, and list
any key practices that appear to
distinguish your company. Then think about how those practices
fit together. Where are there
complementarities, where one activity is made more valuable by
another? Finally, think about how
these practices connect to the position you’ve sketched out.
How do these complementary activities
create value for your customers?
What Is Your Competitive Advantage —
Your Sources of Uniqueness?
The last question on the index card is perhaps the central
question of strategy: Why won’t you be
copied? Even if you’re delivering a great product that customers
love and making money doing it, if
94. competitors can easily enter the market and copy you, economic
theory suggests they’ll drive your
profits down to zero.
There are many sources of competitive advantage, but they
come in roughly two broad categories.
Resource-based advantages are based in unique assets or inputs
that are valuable, rare, hard to
imitate, durable, and specific to your organization. Position-
based advantages involve your role and
the position you occupy in your industry — things like scale
and incumbency or network effects and
early entry. Think about the resources you have that would be
hardest for competitors to copy, as
well as any advantages that your position confers. What would
keep another company from
replicating your operating model?
Understanding LinkedIn’s Business
The questions I’ve outlined leave out plenty of aspects of
strategy. (Again, have a look at the full
notes for a complete account.) Nonetheless, they offer a starting
point for understanding a business
and how it plans to succeed. Consider how LinkedIn might have
answered these questions: It’s a
95. multisided platform, so its index card may look more complex
than most. It has one value
proposition for job seekers and another for recruiters and
consultants. Its operating model
emphasizes free access and easy onboarding, which in turn
creates scale. Scale offers a competitive
advantage in the form of network effects. The more users
LinkedIn has on the platform, the more
valuable it is for everyone. (In my notes you can see an example
where I’ve sketched LinkedIn’s
answers, along with other businesses.) The card suggests some
fit between LinkedIn’s activities. It
has a theory of the value it will provide, how, to whom, and
why its model won’t be easy to copy. In
other words, it has a strategy.
One big limitation of this analysis is the fact that this depiction
is static: It ignores how competitors
react to each other and how industries and technologies change.
As you design your business,
whether from the ground up as an entrepreneur or by evolving a
legacy operation, you’ll want to go
deeper into the field of strategy, to expand your theory of how
you create and capture value. But
96. don’t lose sight of the fundamental questions that underscore a
business’s success: offering
products and services that customers want, selling them for
more than they cost to deliver, and
having some plausible reason for why competitors can’t easily
copy you if it works.
Kevin J. Boudreau is an associate professor of Entrepreneurship
and Innovation at
Northeastern University.
Related Topics: ENTREPRENEURSHIP
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Rajendra Kumar R 3 months ago
informative!!
97. POSTING GUIDELINES
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nergetic, constructive, and thought-
provoking. To comment, readers must sign in or
register. And to ensure the quality of the discussion, our modera
ting team will review all comments and may edit them for clarit
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Comments that are overly promotional, mean-spirited, or off-
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become the property of
Harvard Business Publishing.
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